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Crypto lender BlockFi files for bankruptcy in the US

After the bankruptcy of the crypto currency platform FTX, the crypto lender BlockFi also filed for bankruptcy in the USA.

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Crypto lender BlockFi files for bankruptcy in the US

After the bankruptcy of the crypto currency platform FTX, the crypto lender BlockFi also filed for bankruptcy in the USA. The move is intended to enable a "comprehensive restructuring that maximizes value for all customers and other stakeholders," BlockFi said on Monday. The digital currency lender says it wants to focus on getting back money owed to it.

The company, which was founded in 2017, got into trouble this year due to price losses in cryptocurrencies. FTX then offered BlockFi a $400 million loan over the summer to keep it from going bankrupt. Two and a half weeks ago, however, FTX itself filed for bankruptcy. As a result, BlockFi had to temporarily suspend most of its activities.

The bankruptcy of FTX had shaken the crypto world badly and caused the price of several digital currencies such as Bitcoin to collapse. In the meantime, more and more details are becoming known about the questionable financial behavior of FTX founder Sam Bankman-Fried, who has long been celebrated as a crypto prodigy.

In a court document, newly installed FTX boss John Ray denounced inadequate oversight, missing or untrustworthy financial records and "possibly compromised" corporate governance. The Alameda Research investment fund, also founded by Bankman-Fried, had invested in cryptocurrencies issued by FTX in the course of dubious financial transactions.

The bankruptcy proceedings allow the company to continue operating while a plan to pay back creditors is worked out, according to Bloomberg. BlockFi's bankruptcy filing filed in the US state of New Jersey puts the assets and liabilities at between $1 billion and $10 billion each. The company said it had approximately $257 million in cash on hand. It said it would launch an "internal plan to significantly reduce spending, including labor costs."

BlockFi had halted the possibility of withdrawals in November, citing "lack of clarity" about the status of bankrupt companies FTX and Alameda Research, saying it was reviewing "all options" with outside consultants.

The US Securities and Exchange Commission (SEC) and the futures market authority CFTC have initiated investigations into possible misuse of customer funds against FTX. This created uncertainty as to where the funds for a line of credit that FTX had extended to US BlockFi came from, Bloomberg reported earlier this month.

The company's largest unsecured creditor, Ankura Trust Company, is owed approximately $729 million, according to BlockFi's bankruptcy filing. Ankura acts as a trustee for BlockFi's interest-bearing crypto accounts, according to its website.

In March 2021, BlockFi was valued at $3 billion. This June, it attempted to raise fresh money based on a discounted valuation of about $1 billion. The company also drew attention from financial regulators for its interest-bearing accounts, and in February agreed to pay $100 million in fines to the SEC and several US states. The SEC is listed in the bankruptcy filing as BlockFi's fourth-largest creditor with a claim of $30 million.

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