Always Doomed Blockfi Finally Dies

BlockFi filed for Chapter 11 bankruptcy protection on Monday, becoming the latest company in the industry to blame their woes on failed crypto exchange FTX.

In the filing with the US Bankruptcy Court for the District of New Jersey, the company said it had more than 100,000 creditors, with liabilities and assets ranging from $1 billion to $10 billion.

“BlockFi looks forward to a transparent process that achieves the best outcome for all clients and other stakeholders,” stated Mark Renzi from Berkeley Research Group, which serves as BlockFi’s financial adviser.

In June, the now-defunct FTX crypto exchange agreed to provide the company with a $400 million credit line. BlockFi’s chief executive, Zac Prince, then said the loan would provide “access to capital that further bolsters our balance sheet.” The deal gave FTX the option to buy BlockFi.

The question is why did BlockFi need a $400m credit line BEFORE FTX collapsed? How did they end up so short of funds?

A few days after the exchange collapsed, BlockFi suspended withdrawals, explaining that it had “significant exposure” to FTX, including undrawn amounts from its credit line and assets.

The company’s largest creditors include FTX US, which has a $275 million unsecured claim, and the Securities and Exchange Commission (SEC), which has a $30 million unsecured claim. The majority of the other top 50 creditors’ names were not shared.

BlockFi’s largest creditor is Ankura Trust Company, which the lender appears to have hired in February and now has a $730 million unsecured claim. Ankura Trust provides independent, conflict-free indenture trustee, loan administrative agent, and creditor representative services with a specialty in stressed and distressed situations. We offer our services as a successor and at the time of original issuance, as well as for transactions outside of a restructuring context.

The New Jersey-based BlockFi was created in 2017 and as of last year claimed more than 450,000 retail clients who could obtain loans in minutes, without credit checks. Founded in 2017 by Zac Prince and Flori Marquez, BlockFi was created to provide credit services to markets with limited access to simple financial products. BlockFi sets itself apart from other crypto service providers by pairing competitive rates with institutional-quality benefits. BlockFi is the only independent lender with institutional backing from investors that include Valar Ventures, Galaxy Digital, Fidelity, Akuna Capital, SoFi, and Coinbase Ventures. The BlockFi team consists of professionals with a deep bench of expertise across financial services and technology with offices in New York, New Jersey, Singapore, Poland, and Argentina. Additionally, Gemini Trust Company, LLC, a New York trust company regulated by the New York State Department of Financial Services, is BlockFi’s primary custodian.