Cryptocurrency lending company BlockFi has become the latest centralised crypto entity to file for bankruptcy due to the catastrophic collapse of two market leaders in the industry. The crypto lender officially filed for voluntary Chapter 11 bankruptcy protection in the United States on Monday.

BlockFi’s financial troubles started in May after the Terra Luna crash, which caused the price of crypto assets such as Bitcoin to plunge to new lows.

BlockFi Goes Bankrupt

Unlike several top companies such as Celsius Network and Three Arrows Capital, BlockFi survived the first wave of the bear market as it was rescued by Sam Bankman-Fried’s crypto empire FTX.

At the time, FTX offered a $400 million revolving credit facility to BlockFi with an option to buy the lending firm for $240 million.

However, FTX and its 130 affiliates crashed and went bankrupt earlier this month, leaving BlockFi high and dry. The crypto lender suspended withdrawals on November 14, noting that it had undrawn amounts from FTX’s credit line.

Amid the FTX saga, reports emerged that the crypto lender was exploring bankruptcy, but BlockFi dismissed the claims as rumours.

The speculation turned out to be accurate as the crypto lender, alongside its eight affiliates, has officially begun bankruptcy proceedings in the U.S. Bankruptcy Court for the District of New Jersey to restructure its business.

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

BlockFi to Continue Operations Amid Bankruptcy Proceedings

BlockFi noted that its primary purpose during the bankruptcy proceedings would be to recover all obligations owed to the company by its partners, especially FTX and its associated entities such as Alameda Research.

In addition to the Chapter 11 bankruptcy protection, the crypto lender filed other customary petitions to enable it to continue its business operations under the court’s surveillance. If approved, BlockFi will be able to pay employees wages and benefits without restrictions.

The petitions will also enable it to establish a Key Employee Retention Plan to ensure the company retains “trained internal resources for business-critical functions during the chapter 11 process.”

The firm said it currently has $256 million cash on hand, which could sustain the liquidity of certain operations during the restructuring process.

（By William A. Frederick）