Cryptocurrency lending firm BlockFi filed for bankruptcy Monday, becoming the latest victim of the financial contagion unleashed by the collapse of cryptocurrency exchange FTX.
BlockFi announced earlier this month that it had halted withdrawals, citing its close association with Sam Pinkman-Fried’s FTX exchange, as well as sister hedge fund Alameda.
FTX and Alameda, as well as dozens of their subsidiaries, filed for bankruptcy on November 11.
“Since the discontinuation, our team has explored every strategic and alternative option available to us, remaining fully focused on our primary goal of doing everything we can for our clients,” BlockFi said in a statement.
The privately owned company, founded in 2017 by Zac Prince and Fleury Marquis, loans clients using crypto assets as collateral. BlockFi has approximately $257 million on hand, and the company expects to provide enough liquidity to support it during the restructuring.
Part of the restructuring will include layoffs. It is not yet known how many will be laid off, but the company said it had initiated an internal plan to significantly reduce expenses, including labor costs.
The New Jersey-based company was one of several companies that received a financial boost from Bankman-Fred over the summer, as falling cryptocurrency prices threatened to bring down major players in the digital asset ecosystem. In July, BlockFi secured a $400 million financial lifeline from FTX.
The collapse of the FTX exchange sent earthquakes across the cryptocurrency industry. Shortly after the crash, the lending arm of crypto brokerage Genesis halted redemptions and issuing new loans after an “abnormal” number of withdrawal requests exceeded its current liquidity, citing disruption. Market caused by the bankruptcy of FTX.
“In the crypto world, the moment any company announces they are pausing withdrawals, they are on their deathbed,” said Daniel Roberts, editor-in-chief of Decrypt Media, a news outlet focused on the cryptocurrency market.
