(Kitco News) - The FTX contagion has just claimed its next victim as the cryptocurrency lender BlockFi and eight of its affiliates have voluntarily filed for Chapter 11 bankruptcy in the United States Bankruptcy Court for the District of New Jersey.
The embattled crypto lender indicated that it made the move in an effort to “stabilize its business and provide the Company with the opportunity to consummate a comprehensive restructuring transaction that maximizes value for all clients and other stakeholders,” according to a press release.
As part of its efforts to restructure, BlockFi will attempt to recover all funds owed to it by various counterparties, including FTX and its associated corporate entities. This effort could take considerable time due to the ongoing bankruptcy process for FTX.
In a separate note to clients, BlockFi attempted to reassure its customers that it was doing everything in its power to resolve the liquidity crunch with their best interests in mind.
“Since the pause, our team has explored every strategic option and alternative available to us, and has remained laser-focused on our primary objective of doing the best we can for our clients,” the company said. “These Chapter 11 cases will enable BlockFi to stabilize the business and provide BlockFi with the opportunity to consummate a reorganization plan that maximizes value for all stakeholders, including our valued clients.”
To help facilitate the process, BlockFi has filed a series of customary motions with the court which would allow it to continue to operate its business throughout the bankruptcy.
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Included in these “first day” motions is a request to pay employee wages and continue employee benefits without disruption. The firm also seeks to “establish a Key Employee Retention Plan to ensure the company retains trained internal resources for business-critical functions during the chapter 11 process.”
BlockFi is also looking to internally restructure the company to help reduce labor costs and other expenses. All activity on the platform remains paused, and the lender reports having $256.9 million in cash on hand which is expected to provide sufficient liquidity to support certain operations during the restructuring process.
Alongside the chapter 11 filing, the Bermuda-incorporated BlockFi International Ltd. filed a petition with the Supreme Court of Bermuda for the appointment of joint provisional liquidators pursuant to section 161(e) of Bermuda’s Companies Act, 1981. The firm anticipates that all client claims will be addressed through the Chapter 11 process.
