Sam Bankman-Fried’s FTX collapse has claimed another victim — BlockFi. The digital lending service is filing for chapter 11 bankruptcy and suing the former FTX CEO over shares he allegedly pledged to the company as collateral.
BlockFi had a pretty hefty exposure to FTX, and the platform stopped withdrawals on November 11 as news of FTX’s bankruptcy filing broke. The company is currently focusing on recovering all obligations owed, but the FTX recoveries will take time, considering the ongoing bankruptcy proceedings. BlockFi is also laying off a significant portion of its staff.
As for the Bankman-Fried lawsuit, the former CEO owed about 56.2 million shares or nearly 7.6% of Robinhood Class A common stock, according to a document filed with the Securities and Exchange Commission (SEC).
The Chapter 11 bankruptcy will help BlockFi stabilise its business and recover all obligations owed to the company by its counterparties, including FTX and associated corporate entities. The company also stated it’s an “opportunity to consummate a reorganisation plan that maximises value for all stakeholders, including our valued clients.”
This will also bring a series of customary motions to allow the company to continue running its business. These motions include requests to pay employee wages and continue employee benefits without disruptions pending court approval.
This will also allow BlockFi to establish a Key Employee Retention Plan to ensure that trained staff remains at the company to help correct the course and maintain the business during the Chapter 11 proceedings. An internal plan to considerably reduce expenses, including labour costs, has also been initiated.
Although BlockFi has $256.9 million in cash, enough to provide sufficient liquidity to support specific operations during the bankruptcy filing proceedings, the platform activities are still suspended.
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