BlockFi Files for Bankruptcy as FTX Fallout Spreads

BlockFi also said it would focus on recovering all obligations owed to the company, including those by FTX. However, it warned of delays in recovering assets from FTX given the exchange’s bankruptcy.

John J. Ray III, the new chief executive of FTX, who previously led Enron during its bankruptcy, has called the corporate dysfunction at FTX “unprecedented.” Legal experts say it could take years to unwind and recover assets.

Regulators had already been scrutinizing BlockFi. In February, the Securities and Exchange Commission reached a $100 million settlement with the company’s lending arm for offering loans without registering them as securities, and for not registering itself as an investment company. The S.E.C. also found BlockFi made false and misleading statements about the level of risk in its loan portfolio and lending activity.

BlockFi still owes the S.E.C. $30 million, according to its bankruptcy filing, making the nation’s top securities cop its fourth-largest creditor. It owes $275 million to West Realm Shires, the parent company of FTX’s U.S. exchange and BlockFi’s second-largest creditor. Its top creditor, at about $729 million, is Ankura Trust Company, which specializes in managing loans for distressed companies.

According to documents filed with the bankruptcy court, Valar Ventures, which is backed partly by the tech mogul Peter Thiel, owns 19 percent of BlockFi. A spokesman for Mr. Thiel did not immediately respond to a request for comment.

“From inception, BlockFi has worked to positively shape the cryptocurrency industry and advance the sector,” said Mark Renzi of Berkeley Research Group, a financial adviser to the company. “BlockFi looks forward to a transparent process that achieves the best outcome for all clients and other stakeholders.”

BlockFi’s other bankruptcy advisers include the law firm Haynes and Boone, investment bank Moelis Company and strategic adviser C Street Advisory Group.

Article source: https://www.nytimes.com/2022/11/28/business/blockfi-bankruptcy-cryptocurrency-ftx.html