According to an official press release, BlockFi has commenced restructuring proceedings to stabilize the business and maximize value for its customers and stakeholders. The proceedings began with a voluntary case under Chapter 11 of the United States Bankruptcy Code. The filing is before the Bankruptcy Court for the District of New Jersey.
Many crypto firms have had a fair share of the FTX contagion in the past few weeks. While the market mourns the collapse of the crypto exchange giant, asset prices are down, and many firms are about to close shop.
News of another victim of the contagion reached the industry. The latest reports stated that the crypto lending firm, has commenced Chapter 11 bankruptcy proceedings.
While people believe that the FTX contagion contributed to the firm’s ordeal, Stuart Alderoty has a contrary view. According to Alderoty, Ripple’s general counsel, the Securities and Exchange Commission is said to be responsible for the circumstances surrounding BlockFi’s bankruptcy.
BlockFi Bankruptcy, Another SEC Regulation By Enforcement
In his tweet, Alderoty alleged that BlockFi’s problem is another regulation by-enforcement success story of the SEC. The counsel asserted that the $100 million enforcement fine that the SEC charged BlockFi contributed to the firm’s bankruptcy.
He also raised questions about the $270 million loan outstanding and some unknown amounts owed to BlockFi by FTX. The lawyer further stated that there is no record of the loan unpaid, including the unknown amounts owed to BlockFi by FTX.
He raised questions about the fine in the SED/BlockFi deal and whose money was used for the payment. Alderoty claimed that it must be the customers’ money, which could be the reason for the firm’s insolvency. According to reports, Alderoty questioned the commission to show BlockFi’s ability to pay the settlement.
According to reports, the firm’s creditors are over $100,000, while its assets and liabilities range between $1 billion and $ billion. The largest creditor is Ankura, a trusted company that owes over $729 million. Ankura is also a trustee of BlockFi’s interest account.
As per BlockFi, the liquidity crunch is because of its exposure to FTX through loans to Alameda Research. The firm stated that it intends to lay off most of its 292 employees in a separate filing.
State Of Current Crypto Market
Meanwhile, the crypto market is still absorbing the shock from the FTX collapse. Bitcoin, the largest cryptocurrency, has lost most if its value since the crisis. Experts suggest that BlockFi’s chapter 11 restructuring indicates crypto market-related risks.
However, the market has recovered a bit in the last 24 hours. Bitcoin has added gains in the past 24 hours and is trading at $16,853 today.