WSJ: BlockFi to file for Chapter 11 bankruptcy

The crypto-lending platform BlockFi is preparing to file for Chapter 11 bankruptcy protection. The Wall Street Journal reports, citing people familiar with the matter.

On November 11, the company stated that it would be unable to operate in normal fashion and would restrict operations amid the lack of clarity surrounding the status of FTX and Alameda Research. BlockFi paused withdrawals and urged users not to deposit.

That same day the FTX Group filed for bankruptcy, and Sam Bankman-Fried stepped down as CEO.

On November 14, BlockFi denied reports that most of its assets were stored on FTX. It also acknowledged that the platform has a credit line provided by the exchange’s US arm, as well as outstanding obligations from Alameda Research.

BlockFi is working around the clock to achieve the best possible outcome given last week’s events.

We shared this message with our clients today: https://t.co/ZwhNfQdzMk

— BlockFi (@BlockFi) November 14, 2022

“Rumours that most of BlockFi’s assets are stored on FTX are not accurate. Nevertheless we are exposed to serious risk due to FTX and related corporate structures. This includes obligations from Alameda, assets held on FTX.com, and the unused credit line from FTX.US”, the statement said.

In June 2022, FTX opened BlockFi a revolving credit line of $250 million. Subsequently, the exchange’s US arm issued the company another revolving credit of $400 million, obtaining an option to acquire the platform for $240 million.

According to WSJ sources, BlockFi used a large portion, if not all, of its funds. They also noted that the company extended millions of dollars in loans to Alameda Research, partially secured by FTT tokens.

Sources added that by the end of 2021 the platform held client deposits of between $14 billion and $20 billion and $7.5 billion in outstanding loans.

BlockFi founder Flori Marquez said on November 8 that all of the company’s products were fully functional, and the business is not dependent on the Bankman-Fried exchange.

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