Updated: Nov 29, 2022
The key to getting rich in a bear market is becoming a bankruptcy attorney. - Tiffany Fong
BlockFi filed for Ch 11 Bankruptcy in NJ on Cyber Monday, after halting withdrawals on November 10.
BlockFi was in the business of offering high yields on various crypto products, it offered 6% on Bitcoin and 9.3% on Tether.
The SEC and various state regulators put a real damper on their business when it was sued for $100 million, and forced to shut down its interest accounts in the US.
BlockFi nearly went bankrupt in July, and FTX swooped in and offered a $400 million line of credit, and an offer to buy the Company for up to $240m.
BlockFi’s CEO, Zac Prince, said he learned of FTX’s demise via Twitter, SBF didn’t even have the courage/respect to make a phone call or private message.
BlockFi has 292 staff working today, 288 of which are located in the USA.
This time last year, BlockFi raised $350 million at a valuation of $3 billion.
BlockFi sued FTX moments after filing Chapter 11.
FTX pledged shares in Robinhood to BlockFi after Alameda defaulted on a $680 million collateralized loan in early November.
BlockFi also named brokerage ED&F Man Capital Markets in its lawsuit, saying the London-based company was the broker involved in the pledge agreement. ED&F Man has “refused to transfer the Collateral to BlockFi”, the lender states in the complaint.
What does this mean for retail loans?
Loans have gone into forbearance, any amounts due, including interest are set to 0 as of Nov 11. Loans will not be reported as delinquent to credit bureaus.
The SEC is a creditor, they are owed $30 million, and they have priority to be paid back before the retail investors that the SEC is here to protect.
The SEC should disgorge the $20 million they’ve already collected, considering this fine is actually contributed in large part to the financial distress.
The SEC’s action led BlockFi to engage in the deal with FTX, and to move their customer’s funds onto the FTX platform, only to be wiped out.
BlockFi has more than 100,000 creditors and between $1 billion and $10 billion in liabilities.
Cash on hand - $256.9 million (not nearly enough!)
Note the attorney fees from Celsius amount to approx $4m/month)
Note there are still 292 staff to pay
The top 50 creditors include
Ankura Trust Company -$ 729 million
FTX US - $275 million
SEC $30 million
Attorney Compensation to date
Kirkland and Ellis $3,470,000
Haynes & Boone $2,654,000
Cole Schotz $185,000