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FTX Collapse Results In Crypto Firm BlockFi Filing For Bankruptcy Protection In The US

FTX Collapse Results In Crypto Firm BlockFi Filing For Bankruptcy Protection In The US
Following the collapse of purported acquirer FTX, troubled crypto firm BlockFi has filed for Chapter 11 bankruptcy protection in the United States Bankruptcy Court for the District of New Jersey.
According to the filing, the company has over 100,000 creditors, with liabilities and assets ranging from $1 billion to $10 billion.
The company listed a $275 million loan to FTX US, the American arm of Sam Bankman-now-bankrupt Fried's empire, in the filing.
Concurrent with the American filing, a BlockFi subsidiary filed for bankruptcy in Bermuda.
Bermuda, like the Bahamas, sees cryptocurrency as the future of finance. Both organizations established frameworks to specifically deal with crypto assets and digital currencies.
The first major legal tests of their crypto regulations is being faced by the Bahamas, which has been severely hit by the collapse of FTX, and Bermuda, which faces the bankruptcy of BlockFi. 
According to BlockFi's bankruptcy filing, the company's largest disclosed client has a balance of nearly $28 million.
“BlockFi looks forward to a transparent process that achieves the best outcome for all clients and other stakeholders,” Berkeley Research Group’s Mark Renzi said in a press statement. BRG serves as BlockFi’s financial advisor.
The crypto company, which offers a trading exchange and interest-bearing custodial service for cryptocurrencies, was one of many firms to face serious liquidity issues after the implosion of Three Arrows Capital.
Customer deposit withdrawals had already earier been stopped by the Jersey City, New Jersey-based company and had admitted to having "significant exposure" to the now-collapsed crypto exchange FTX and its sister trading house, Alameda Research.
“We do have significant exposure to FTX and associated corporate entities that encompasses obligations owed to us by Alameda, assets held at, and undrawn amounts from our credit line with FTX.US,” BlockFi previously said.
According to people familiar with the situation, the firm began talking with restructuring professionals in the days following FTX's bankruptcy filing.
BlockFi, which was last valued at $4.8 billion by PitchBook, is one of many crypto firms feeling the effects of FTX's demise. FTX stepped in to help BlockFi avoid bankruptcy in July, extending a $400 million revolving credit facility and offering to buy the troubled lender.
On November 11, Sam Bankman-cryptocurrency Fried's exchange FTX filed for Chapter 11 bankruptcy protection in the United States, and the ripple effect has been swift across the crypto sector.
The proceedings also include about 130 additional affiliated companies which include Alameda Research, Bankman-Fried’s crypto trading firm, and, the company’s U.S. subsidiary.
In a court filing filing with the Delaware Bankruptcy Court, FTX’s new CEO John Ray said that “in his 40 years of legal and restructuring experience,” he had never seen “such a complete failure of corporate controls and such a complete absence of trustworthy financial information as occurred here.”
Ray was previously the CEO of Enron following the company's demise.
it was within just a few days that FTX became bankrupt because of dried up liquidity compared to its last valuation of $32 billion, and as its customers started demanding withdrawals of their investments. Additionally, its competeing crypto exchange Binance scrapped its nonbinding deal of acquiring the distressed company. Since then, gross negligence has been revealed. Ray went on to say that a "significant portion" of the assets held by FTX could be "missing or stolen."
According to updated bankruptcy filings, FTX has over 1 million creditors, indicating the massive impact of its collapse on crypto traders and other counterparties with ties to Bankman- Fried's empire.

Christopher J. Mitchell

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