Key takeaways:
- Crypto lender BlockFi filed for bankruptcy on Monday
- BlockFi secured a $400 million credit facility from FTX after facing liquidity problems earlier this year
- The lender is now suing Sam Bankman-Fried for Robinhood shares that were collateral for the BlockFi loan
BlockFi has over 100,000 creditors and between $1B and $10B in liabilities
Weeks after suspending withdrawals, the crypto lending firm BlockFi filed for Chapter 11 bankruptcy in the United States Bankruptcy Court for the District of New Jersey on November 28. Per the company’s press release, BlockFi “will focus on recovering all obligations owed to BlockFi by its counterparties, including FTX and associated corporate entities.”
According to bankruptcy documents, the company has more than 100,000 creditors and estimated liabilities of between $1 billion and $10 billion.
BlockFi’s insolvency comes after a tough 2022 for the crypto lender. In February, BlockFi had to pay a $100 million fine after settling with the U.S. Securities and Exchange Commission (SEC) in a case that alleged that the company’s lending products breached state and federal securities laws. In May, after the collapse of Three Arrows Capital (3AC), a crypto hedge fund that had large exposure to the Terra ecosystem, BlockFi was forced to seek new capital to compensate for the losses accrued in the collapse of 3AC, one of BlockFi’s largest clients.
At the time, FTX came to the rescue and extended a $400 million credit facility that included a provision that gave FTX US an option to buy BlockFi. With the collapse of FTX earlier this month, the lender lost access to the credit facility and filed for bankruptcy a couple of weeks later.
FTX’s loan to BlockFi was collateralized with Sam Bankman-Fried’s Robinhood shares
According to Financial Times’ report, the assets that were loaned to BlockFi by FTX were collateralized by none other than Sam Bankman-Fried’s own Robinhood shares. Recall that the FTX founder bought a 7.6% stake in Robinhood earlier this year for more than $600 million.
FT reports that Bankman-Fried pledged his shares as collateral just days before FTX collapsed. Now, BlockFi is reportedly suing for the collateral it failed to receive from FTX. As of this writing, FTX nor BlockFi made any comments regarding SBF’s Robinhood shares.
