As the cruel crypto winter continues to march on another shocking news came out on Monday when a U.S.-based crypto lender BlockFi filed for bankruptcy.
The company’s official statement revealed that they are seeking protection under the guidelines of Chapter 11.
It is important to know that this is the second big cryptocurrency organization that has collapsed followed by the collapse of FTX earlier in the month of November.
The demise of FTX has created intense unrest in the market. BlockFi earlier freezed withdrawals of funds which it has received from FTX amid the consequences of FTX’s fall.
BlockFi Filed for Chapter 11 Protection
Chapter 11 bankruptcy refers to a situation where an organization becomes vulnerable due to its reorganization process.
The company’s top management further added that it started the process of restructuring while continuing its crypto operations.
As of now when the company has officially sought protection in order to avoid the disaster, it has the amount of $257 in its cash flows which are currently freezed.
BlockFi’s Current Situation
According to BlockFi’s records the company currently has over 100,000 creditors.
Moreover, the company’s current assets are valued at around $1 Billion and it has liabilities valued at $10 billion.
BlockFi which has previously received a credit amount worth $400 million from the FTX has had a rocky financial year.
BlockFi receives money from investors and then puts that money into its interest accounts to offer the investors a sustainable yield has also warned investors to stop investing money in its crypto wallet.
How Situation Went Worst For BlockFi
BlockFi was accused that it has breached federal security law by offering greater yield on its interest accounts.
As the result, BlockFi was fined $100 million and which was due in February. As the result, the company terminated the contracts with almost one-fifth of its workers.
The company’s market cap of interest accounts fell from $3 trillion to $1 trillion, making it nearly impossible for the company to pay interest to thousands of its investors.
Moreover, BlockFi also received another outstanding claim of $730 million from Ankura Trust Company, one of BlockFi’s biggest creditors that was approached by BlockFi back in February.
It seems that the gap between BlockFi’s current assets and current liabilities is roughly around $9 billion. Moreover, the company’s market cap has also seen a gigantic fall.
On top of that company has freezed the withdrawals and warned investors to stop investing in its crypto wallets. The crypto lender still owes the credit worth of $400 million to FTX, which is being freezed by BlockFi at this very moment.
As of this writing things seems pretty damaging for BlockFi with high chances of solvency going forward.