DIGITAL DOMINO EFFECT

Now BlockFi bu$t

Prominent cryptocurrency lending platform BlockFi filed for bankruptcy Monday as the contagion effect from FTX’s collapse spreads through the sector, company officials said.

The company’s bankruptcy filing stated it has more than 100,000 creditors, along with estimated assets and liabilities of between $1 billion and $10 billion. BlockFi confirmed bankruptcy proceedings were underway and warned that it “expects that recoveries from FTX will be delayed” due to the platform’s meltdown.

“With the collapse of FTX, the BlockFi management team and board of directors immediately took action to protect clients and the company,” said Mark Renzi of Berkeley Research Group, BlockFi’s financial adviser.

“From inception, BlockFi has worked to positively shape the cryptocurrency industry and advance the sector. BlockFi looks forward to a transparent process that achieves the best outcome for all clients and other stakeholders,” Renzi added.

BlockFi said it expects to receive court approval on motions “to pay employee wages and continue employee benefits without disruption” as it aims to maintain operations during the proceedings. The company said it would also seek to retain “business critical” employees.

Cost-cutting plan

Aside from filing for bankruptcy, BlockFI said it has “initiated an internal plan to considerably reduce expenses, including labor costs.” Cryptocurrency news outlet Decrypt had earlier reported BlockFi was laying off a significant portion of its staff.

A BlockFi representative did not respond to a request for comment on how many workers will be affected.

BlockFi enacted a “pause” in customer withdrawals earlier this month when FTX’s troubles first surfaced. The company said the suspension remains in effect.

“BlockFi has US$256.9 million in cash on hand, which is expected to provide sufficient liquidity to support certain operations during the restructuring process,” the company said in its release.

The platform’s filing marked the latest turn in a months-long saga that saw BlockFi’s fortunes closely tied to those of FTX.