BlockFi Files For Bankruptcy
A few weeks ago, the ripple effect that the FTX collapse would have on customers was starting to become apparent. Besides the nearly one million people who found themselves shut out of their FTX accounts, several institutions that had exposure to the exchange also had to make tough decisions. One of these was the crypto lender BlockFi which announced that it would be ceasing customer withdrawals as it assessed the situation.
“At this time, withdrawals from BlockFi continue to be paused. We also continue to ask clients not to submit any deposits to BlockFi Wallet or Interest Accounts,” the company said at the time.
Now, weeks late, BlockFi has offered an update to customers and it is not good news. In an email sent to customers on November 28, 2022, the company announced a bankruptcy filing.
Details About the Filing
In the statement, BlockFi noted the ‘difficult’ decision to halt customer withdrawals following the FTX collapse. After weeks of deliberation, the company eventually decided that filing for Chapter 11 bankruptcy was the best move forward.
“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. 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,” the statement said.
Despite this, BlockFi says that it will still continue to work on recovering all the funds that are owed to it and its customers. Links to the official bankruptcy filing documents were published on the BlockFi website and the company has made it clear that it will be carrying its customers along for the journey.
“We look forward to transparency through our reorganization, and will work to keep clients and stakeholders informed as we make progress[…] Acting in the best interest of our clients is our top priority and continues to guide our path forward,” the email said.
The last year has been rather challenging for the crypto lender. Between the $100 million it agreed to pay to the U.S. Securities and Exchange Commission to settle some charges and the FTX exposure, it has taken a massive hit in 2022. But for its users, it is encouraging that the platform is not planning to shut down necessarily and its management is still determined to recover its funds the best it can.
An Industry in Recovery
At this point, it is clear that the FTX saga is far from over. While the exchange itself has filed for bankruptcy and is under investigation in several countries, the projects that have exposure to it are also facing challenges.
First, it was the projects that were forced to suspend withdrawals and now, we have seen one of the first bankruptcy filings. As the dust settles over the next few weeks, there is a chance that more FTX-connected projects will make similar filings.