Crypto Company Declares Bankruptcy As The Effects of FTX Spread

129
Credit: Traxer/Unsplash

Following the collapse of potential buyer FTX, struggling cryptocurrency company BlockFi has applied for Chapter 11 bankruptcy protection in the US Bankruptcy Court for the District of New Jersey, as reported by CNBC.

Unpaid loan

The corporation disclosed in the petition that it has more than 100,000 creditors and obligations and assets between $1 billion and $10 billion. The business also disclosed a $275 million loan that was yet unpaid to FTX US, the branch of Sam Bankman-now-bankrupt Fried’s company in America.

In Bermuda, a BlockFi subsidiary also filed for bankruptcy at the same time that it did in America.

Like the Bahamas, Bermuda has accepted cryptocurrency as the wave of the future of money. Both organisations created frameworks to deal exclusively with digital currency and cryptographic assets. The Bahamas and Bermuda are now facing the first substantial judicial tests of their cryptocurrency legislation due to FTX’s insolvency and BlockFi’s in Bermuda.

According to BlockFi’s bankruptcy petition, its biggest revealed client had a balance of around $28 million.

Berkeley Research Group’s Mark Renzi stated in a press release that “BlockFi looks forward to a transparent process that provides the best outcome for all clients and other stakeholders.” BlockFi’s financial consultant is BRG.

The cryptocurrency company, one of many businesses that experienced severe liquidity problems following the collapse of Three Arrows Capital, provides a trading exchange and an interest-bearing custody service for cryptocurrencies.

Substantial exposure 

The Jersey City, New Jersey-based business acknowledged that it had “substantial exposure” to the now-defunct crypto exchange FTX and its sibling trading house, Alameda Research, and had already stopped withdrawing customer money.

According to a recent statement by BlockFi, “We do have significant exposure to FTX and affiliated corporate entities, which includes liabilities owed to us by Alameda, assets stored at FTX.com, and undrawn sums from our credit line with FTX.US.”

After FTX filed for bankruptcy, the company began speaking with restructuring experts, according to persons with knowledge of the situation.

Requests for a response from a BlockFi representative were not immediately answered.

Many cryptocurrency companies are being impacted by FTX’s demise, including BlockFi, which PitchBook estimates to have recently been valued at $4.8 billion. FTX intervened in July to help BlockFi avoid bankruptcy by extending a $400 million revolving credit facility and making a potential purchase offer for the struggling lender.

Bankruptcy protection 

Exchange of cryptocurrencies run by Sam Bankman-Fried On November 11, FTX filed for Chapter 11 bankruptcy protection in the United States, and the ripple effect spread quickly throughout the cryptocurrency industry.

A total of 130 further linked companies are involved in the proceedings, including FTX.us, the corporation’s U.S. subsidiary, and Alameda Research, Bankman-cryptocurrency Fried’s trading company. In a document submitted to the Delaware Bankruptcy Court, FTX’s new CEO John Ray claimed that in his 40 years of legal and restructuring experience, he had never witnessed “such a complete failure of corporate controls and such a complete absence of trustworthy financial information as occurred here.”

After the collapse of the energy giant, Ray used to be the CEO of Enron.

As liquidity dried up, users requested withdrawals, and rival exchange Binance pulled up its non-binding agreement to buy the company, FTX plummeted from a $32 billion valuation to insolvency in a matter of days. Since then, grave neglect has been revealed. A “significant amount” of the funds owned by FTX, according to Ray, “may be lost or stolen.”

According to the latest bankruptcy papers, FTX has more than 1 million creditors, which suggests the enormous impact of its collapse on cryptocurrency dealers and other counterparties connected to Bankman-enterprise. Fried’s

 

Did you subscribe to our newsletter?

It’s free! Click here to subscribe!

Source: CNBC

LEAVE A REPLY

This site uses Akismet to reduce spam. Learn how your comment data is processed.