Crypto lender BlockFi which suspended withdrawal on its platform following the liquidity crunch of FTX has filed for bankruptcy.
On Monday 28th January, the ailing crypto lending firm filed for Chapter 11 bankruptcy protection in the United States Bankruptcy Court for the District of New Jersey. According to the document, the protection is for BlockFi and its other eight subsidiaries.
After the implosion of FTX which won the bid to acquire the lender, the state of health of BlockFi has been unstable.
This condition eventually led to halting withdrawal on its platform more than two weeks ago. During that time, some information about its initial bid was uncovered. It was announced that Switzerland-based crypto lending platform Nexo had equally signified interest to acquire BlockFi.
Nexo $850M Acquisition Bid to BlockFi
Nexo made an $850 million bid to BlockFi to acquire its assets in July after it was exposed to the bankrupt crypto hedge fund Three Arrows Capital (3AC) and lost $80 million. Alas, it turned out to be an unsuccessful indicative investment proposal as BlockFi chose FTX’s lower proposal instead. BlockFi signed a tentative agreement with FTX U.S for a meager $15 million which was meant to go higher based on performance.
Antoni Trenchev, Nexo Co-founder confirmed the offer, “I can confirm that we offered BlockFi a deal in the summer. It was a better alternative to the FTX proposal, but BlockFi’s management chose to go with FTX. Since it did not make economic sense for them to go with a worse deal, we were perplexed and there were speculations about conflicts of interest.”
However, the implosion and the contagion of FTX made BlockFi unsure of its stance as the FTX bankruptcy proceedings have not made positive headway in terms of repayment of investors. Instead, more debts have been discovered to the tune of $3 billion for its top 50 creditors.
Currently, BlockFi says it has $256.9 million at the hand of which it has filed a motion to “pay employee wages and continue employee benefits without disruption.” Also, the crypto lender plans to “establish a Key Employee Retention Plan to ensure the company retains trained internal resources for business-critical functions.” Already, an internal plan has been finalized to reduce expenses.