Yahoo Finance reporter David Hollerith details the news that crypto company BlockFi filed for bankruptcy in the state of New Jersey amid the collapse of FTX.
- The fallout from the collapse of crypto exchange FTX widens as crypto lender BlockFi is filing for Chapter 11 bankruptcy protection in New Jersey. Yahoo! Finance crypto reporter David Hollerith joins us now. David, good to see you. That question has been, since FTX went down, everyone looking around, who's next? And now we know.
DAVID HOLLERITH: Yeah, yeah. Just a little bit about BlockFi's history over the past year. As many know, they faced troubles over the summer, along with competitors Voyager Digital and Celsius Network. And unlike those two, which filed for bankruptcy in July, BlockFi was saved by a white-knight bailout from FTX. And obviously, in recent days, many people have seen how the bailout has turned out to be. Its undoing. So this is not necessarily a surprise.
BlockFi paused withdrawals almost two weeks back. And, you know, when that happens to a crypto company, it's typically difficult to revert in terms of avoiding bankruptcy. So the company has more than 100,000 creditors in its bankruptcy petition and about anywhere between $1 and $10 billion in assets and liabilities. It was also revealed too that its three biggest creditors are Ankura Trust, which is a distressed loan administration company, West Realm Shires, which is an FTX affiliate firm, and also a settlement payment it made to the SEC, which is still outstanding.
And according to its declaration, which was also filed today, the results-- what happened that led to the bankruptcy and BlockFi filing for Chapter 11 ultimately was a liquidity shortage, which started in the first two weeks of November, wherein BlockFi requested more credit from FTX. And an FTX affiliate firm, Alameda, eventually defaulted on $680 million in loan obligations. Now, going to this restructuring, BlockFi, you know, has about $256 million in cash to pay for operations. It's also laid off about 2/3 of its employee-- or its workforce to cut expenses in bankruptcy.
- Yeah, I find it pretty interesting that the SEC is listed among the creditors of BlockFi. But let me ask you. Everybody's wondering, who's next? Is it one of the, I guess, big remaining firms at the top? Who's at risk for bankruptcy here next?
DAVID HOLLERITH: Yeah, it's not it's not a secret that Genesis Lending, which is a larger crypto lender than BlockFi, also paused withdrawals about two weeks ago. And, you know, we're waiting to hear what the latest word is from them. And they're the one to watch. So since pausing withdrawals, they've said that they're seeking anywhere between $500 million and $1 billion in additional investor funds. And for perspective, you know, I think BlockFi originates about $2 billion in loans, and Genesis has originated about $2.8 billion. And that's as of the end of the third quarter. So this is a bigger firm and they have a lot more outstanding clients, who obviously could-- it could mean a lot more contagion for smaller firms.
- All right, David Hollerith, good stuff there. Thank you, my friend.