Crypto lending firm BlockFi has filed for Chapter 11 bankruptcy under US laws as it looks to restructure its business. BlockFi paused all customer withdrawals and transfers of assets last month immediately after the FTX collapse.
“As part of our restructuring efforts, we will focus on recovering all obligations owed to BlockFi by counterparties, including FTX,” BlockFi said in a Twitter post.
The crypto firm said that it has started working on cutting expenses including labour costs. No layoffs have been announced by the company since the FTX collapse last month. FTX, which also owes billions of dollars to multiple creditors, filed for Chapter 11 bankruptcy protection last month.
Also known as reorganisation bankruptcy, Chapter 11 allows companies to restructure debts while they continue with their operations. During the process, the court gives debtors time to come up with a reorganisation plan which involves re-negotiating debt with the creditors.
BlockFi said that it has $256.9 million in cash, which would help it provide sufficient liquidity to carry on key operations during the restructuring process. The crypto firm reportedly owes $1 billion to $10 billion in liabilities to more than 100,000 creditors including FTX, according to its bankruptcy filing.
It also had to pay $50 million in penalties to the Securities and Exchange Commission (SEC) for violation of security offering regulations.
“Maximising value for all clients and other stakeholders is our priority. This process will help BlockFi to stabilise our business and provide us with the opportunity to work towards consummating a comprehensive restructuring transaction to maximise value,” BlockFi added in another Twitter post.
Founded in 2017 by Zac Prince and Flori Marquez, BlockFi provides credit services in USD to crypto owners.
After the crypto market crashed in May, FTX offered financial support to several struggling crypto firms. In July, BlockFi received a $400 million credit from FTX as part of a deal, which included a future acquisition by the crypto exchange.