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BlockFi files for bankruptcy following in the footsteps of FTX

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Key facts:
  • Following the collapse of FTX, BlockFi had to suspend withdrawals from its platform.

  • BlockFi said it had a “significant exposure” of assets deposited on FTX.

BlockFi, the lending platform founded in 2017, filed for bankruptcy along with eight of its subsidiaries this Monday, November 28. The company filed for protection under Chapter 11 of the U.S. Bankruptcy Act.

In a press release BlockFi’s statement, released today, says the bankruptcy filing is part of a “restructuring” as they are proceeding with legal claims on funds that were compromised by FTX’s bankruptcy. In the meantime, they have asked that the company remain operational. As the restructuring process continuesUnder Chapter 11.

In the press release, BlockFi specified that it has approximately $256 million in available cash, which will be used for this restructuring process. The company expects that the capital injection will be used to meet all of its legal obligations to creditors. The funds will be used as part of the restructuring to pay employees’ salaries.

The company did not clarify what will happen to its customers’ funds, taking into account that since November 11 the platform has disabled withdrawals, as required by the reported CryptoNews. In document Chapter 11 protection request, BlockFi claims to have more than 100,000 creditors..

FTX and BlockFi had a fairly close relationship. In June this year, BlockFi went through a financial crisis, reception a financial lifeline with a $400 million line of credit from FTX US. This made FTX the company’s largest creditor in lending, with a liability of about $275 million. The Securities and Exchange Commission (SEC) is also among the company’s creditors, owing $30 million.

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FTX is the one injecting capital into BlockFi.After the collapse, the company found itself in a very complicated situation and ended up filing for bankruptcy. The Wall Street Journal had already ahead this possibility on November 15.

Chapter 11 of the U.S. Bankruptcy Law allows companies to file for bankruptcy as a measure of protection from creditors. However, the assets of the bankrupt company are transferred to an assigned court, which will handle their administration. As a result, it may take a lengthy process before platform users review their funds.

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