Crypto Firm BlockFi Goes Bankrupt
November 30, 2022
BlockFi Inc. and eight of its affiliates commenced voluntary cases under Chapter
11 of the U.S. Bankruptcy Code in the United States Bankruptcy Court for the
District of New Jersey to stabilize its business and provide the Company with
the opportunity to consummate a comprehensive restructuring transaction that
maximizes value for all clients and other stakeholders.
As part of its restructuring efforts, the Company will focus on recovering all
obligations owed to BlockFi by its counterparties, including FTX and associated
corporate entities (“FTX”). Due to the recent collapse of FTX and its ensuing
bankruptcy process, which remains ongoing, the Company expects that recoveries
from FTX will be delayed.
“With the collapse of FTX, the BlockFi management team and board of directors
immediately took action to protect clients and the Company,” said Mark Renzi of
Berkeley Research Group, the Company’s financial advisor. “From inception,
BlockFi has worked to positively shape the cryptocurrency industry and advance
the sector. BlockFi looks forward to a transparent process that achieves the
best outcome for all clients and other stakeholders.”
To
ensure a smooth transition into Chapter 11, BlockFi is filing with the Court a
series of customary motions to allow the Company to continue to operate its
business. These “first day” motions include requests to pay employee wages and
continue employee benefits without disruption, for which the Company expects to
receive Court approval, as well as to establish a Key Employee Retention Plan to
ensure the company retains trained internal resources for business-critical
functions during the chapter 11 process. The Company today also initiated an
internal plan to considerably reduce expenses, including labor costs.
Platform activity continues to be paused at this time. BlockFi has US$256.9
million in cash on hand, which is expected to provide sufficient liquidity to
support certain operations during the restructuring process.
In parallel with these chapter 11 cases, BlockFi International Ltd. a Bermuda
incorporated company, filed a petition with the Supreme Court of Bermuda for the
appointment of joint provisional liquidators pursuant to section 161(e) of
Bermuda’s Companies Act, 1981 in the near term. BlockFi currently anticipates
that client claims will be addressed through the Chapter 11 process.
Advisors
Haynes and Boone LLP, Kirkland & Ellis LLP, and Cole Schotz P.C. are serving as
legal counsel, Moelis & Company is serving as investment banker, and Berkeley
Research Group is serving as financial advisor to the Company. C Street Advisory
Group, LLC is serving as strategic restructuring and communications advisor to
the Company.
About BlockFi
Founded in 2017, BlockFi is building a bridge between digital assets and
traditional financial and wealth management products to advance the overall
digital asset ecosystem for individual and institutional investors.
