by Hannah Lang, Niket Nishant and Manya Saini
(Reuters) – BlockFi, a crypto-asset lending platform, announced on Monday that it is filing for Chapter 11 bankruptcy protection in the United States, further bad news for an industry that has been in a serious crisis of confidence since the fall of FTX less than a month ago.
BlockFi, headquartered in the state of New Jersey, indicates that FTX was its second creditor (of more than 100,000) and that it owed him $ 275 million (265 million euros) under a loan of which the due date was extended.
An agreement signed with FTX in July also provided for the latter to open a $400 million credit facility in favor of BlockFi and was accompanied by a purchase option for an amount likely to reach $240 million.
BlockFi’s bankruptcy filing comes on the heels of those filed in July by two of its main competitors, Celsius Network and Voyager Digital, which the latter had justified due to extreme market conditions that caused heavy losses.
Crypto lenders like BlockFi grew very quickly during the pandemic by attracting individual investors who promised them double-digit rates of return from their cryptocurrency deposits, while lending those assets to institutional investors, usually hedge funds, willing to pay high interest.
These platforms are not subject to the same capital or liquidity requirements as “classic” credit institutions and some find that they are severely weakened when the lack of guarantees (or collateral) forces them or their clients to recognize heavy losses.
BlockFi’s first creditor is Ankura Trust, a firm that specializes in representing lenders in these cases, to which it owes $729 million.
Valar Ventures, a venture capital firm affiliated with investor Peter Thiel, holds a 19% stake in BlockFi.
More surprisingly, the latter indicates that the Securities and Exchange Commission (SEC), the authority of the US financial markets, is one of the main creditors, up to 30 million dollars.
In February, a BlockFi subsidiary had agreed to pay $100 million to the SEC and 32 U.S. states to end open litigation associated with one of its financial products.
On a blog, BlockFi assures that the placement under the protection of the bankruptcy law will allow it to stabilize its activities and best protect the interests of all stakeholders.
The group had previously halted withdrawals on its platform and admitted to being heavily exposed to FTX and its affiliates.
(Reporting Hannah Lang in Washington, Niket Nishant and Manya Saini in Bangalore and Elizabeth Howcroft in London, with Dietrich Knauth; French version Marc Angrand, edited by Matthieu Protard)