Troubled crypto firm BlockFi has filed for bankruptcy in the US as FTX’s dramatic collapse continues to resonate across the industry.
The company had already suspended most activity on the platform, citing “significant exposure” to FTX.
BlockFi said it is seeking legal protection for its restructuring, debt repayment and return of funds to investors.
BlockFi had secured a bailout deal from FTX earlier this year as the value of the cryptocurrency plummeted.
However, cryptocurrency exchange FTX faced its own set of problems this month as people questioned their cash flow and tried to withdraw money from the platform.
The company declared bankruptcy after former boss Sam Bankman-Fried, the so-called “King of Cryptocurrencies,” resigned.
The collapse has shaken confidence in the cryptocurrency industry and put regulators under scrutiny.
BlockFi, which provided borrowers with crypto-backed loans and other financial services, described the FTX demise as “shocking.”
In a court filing, New Jersey-based BlockFi said it owes more than 100,000 creditors. It lists cryptocurrency exchange FTX as the second largest lender, with a loan made earlier this year that left him $275 million in debt.
The company also owes $30 million to the US Securities and Exchange Commission. The company earlier this year discovered that it had improperly registered products and misled the public about the level of risk in its loan portfolio and loans.
BlockFi said the Chapter 11 bankruptcy filing will allow the company to develop a “restructuring plan that maximizes value for all stakeholders, including valued customers.”
The company says it has nearly $257 million in cash on hand.
Mark Renzi of Berkeley Research Group, the company’s financial advisor said,
“From inception, BlockFi has worked to positively shape the cryptocurrency industry and advance the sector. BlockFi looks forward to a transparent process that achieves the best outcome for all clients and other stakeholders.”
Founded in 2017, BlockFi touted itself as a bridge between cryptocurrencies and traditional financial instruments.
Over the past few years, it has received hundreds of millions of investments from leading technology investors such as Bain Capital Ventures and Tiger Global. Over the past year, more than $15 billion in assets were under management as the value of cryptocurrencies skyrocketed.
The company wasn’t the only one to suffer after the price of cryptocurrencies fell earlier this year. The value of Bitcoin, the most famous digital currency, has fallen from over $64,000 a year ago to just under $20,000 in June.
Celsius Network and Voyager Digital are among other companies that have filed for bankruptcy.
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