The digital asset lender was once valued at $4.5 billion (US$3 billion).
In a statement, BlockFi confirmed that BlockFi Inc. and eight of its affiliates had commenced Chapter 11 voluntary bankruptcy. BlockFi International also filed for bankruptcy in Bermuda.
BlockFi had been teetering on the edge of collapse and warned two weeks ago it was exploring a bankruptcy filing. It also paused withdrawals and limited activity on its platform.
Earlier this year it was saved from bankruptcy by FTX, which gave the company access to $600 million (US$400 million) in loans.
“This action follows the shocking events surrounding FTX and associated corporate entities and the difficult but necessary decision we made as a result to pause most activities on our platform,” the company said in a statement.
BlockFi stated it filed for bankruptcy in order to “stabilise its business and provide the company with the opportunity to consummate a comprehensive restructuring transaction that maximises value for all clients and other stakeholders.”
The company owes money to about 100,000 creditors. It has assets and liabilities between $1.5 billion (US$1 billion) and $15 billion (US$10 billion) each.
It has about $385.51 million (US$256.9 million) of cash on hand which will be used to provide “sufficient liquidity to support certain operations during the restructuring process”.
The company stated it would focus on recovering all obligations owed to BlockFi by its counterparties, including FTX and associated corporate entities.
It stated that with the recent collapse of FTX and its bankruptcy process, the company expected that recoveries from FTX would be delayed.
“With the collapse of FTX, the BlockFi management team and board of directors immediately took action to protect clients and the company,” Mark Renzi of Berkeley Research Group said, the company’s financial advisor.
“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.”
The company will continue to operate and submitted a motion to pay employee wages and “initiated an internal plan to considerably reduce expenses, including labour costs”.
BlockFi announced on November 10 that it was halting withdrawals as a liquidity crisis gripped FTX.
The firm was already under major pressure due to the collapse of Three Arrows Capital earlier this year where it was hit with about $120 million (US$80 million) in losses.