BlockFi, a cryptocurrency lender, declares bankruptcy

BlockFi is the latest domino to fall in the aftermath of FTX, one of the world’s largest cryptocurrency exchanges, which had recently propped up BlockFi with a loan and had an option to buy the company.

FTX is currently under investigation by multiple US federal agencies for mismanaging customer deposits and sending money to its hedge fund, Alameda Research, to place risky bets on its behalf.

This month, FTX and Alameda Research both declared bankruptcy.

BlockFi’s financial advisor, Mark Renzi of Berkeley Research Group, announced the lender’s own Chapter 11 bankruptcy on November 28 in New Jersey in a press release.

“With the collapse of FTX, the BlockFi management team and board of directors immediately took action to protect clients and the Company.”

While BlockFi owes FTX money, he added that “recoveries…will be delayed” due to FTX’s own bankruptcy.

According to court documents, BlockFi owes FTX $275 million, making it the company’s second largest creditor after Ankura Trust Company. BlockFi’s interest-bearing accounts are managed by Ankura, to whom it owes $729 million.

The majority of BlockFi’s large creditors are unnamed clients, but a $30 million settlement owed to the US Securities and Exchange Commission is also listed.

The Securities and Exchange Commission (SEC) charged BlockFi in February with failing to register offers of its retail crypto lending product, alleging that its high-yield accounts violated federal securities laws.