The lending platform has become the latest casualty of the virus that began with the failure of the cryptocurrency exchange FTX and has spread throughout the sector.
According to the document, BlockFi is expected to have more than 100,000 creditors, and its liabilities are anywhere between $1 and $10 billion. The report provides evidence that the company has a cash balance of $256.9 million.
According to a statement that was published on BlockFi's Twitter, "As part of our attempts to restructure, we will focus on collecting any debts owing to BlockFi by counterparties, including FTX."
Our first concern is making sure that we are serving the needs of our customers in the greatest way possible, and this principle will continue to direct our actions moving ahead. The process of filing for Chapter 11 is open to the public, and we will maintain open lines of communication with our customers to ensure that they hear directly from us.
In the aftermath of the collapse of the whole sector as a whole, this filing is another another example of lenders that are facing insolvency in recent months. Celsius declared bankruptcy in July of this year, and just yesterday, Genesis ceased withdrawals, which forced Gemini Earn to do the same.
A source who talked with Decrypt indicated that in addition to initiating the bankruptcy procedures, BlockFi will also be terminating the employment of a "significant chunk" of its workforce.
The failure of the cryptocurrency hedge fund Three Arrows Capital in June of 2022 caused a contagion that led to the acquisition of BlockFi by FTX, who bailed out BlockFi and then shortly after purchased the company.
Following the recent collapse of FTX and the associated Alameda Research hedge fund, concerns over BlockFi's capacity to protect customer funds have emerged. These only grew when BlockFi acknowledged they did not have any additional clarity on the issue surrounding FTX and began restricting clients on their platform, including suspending withdrawals. This was the sole factor that led to the spike in these.
BlockFi has provided extra information for consumers who may have queries regarding the events that are taking place in a blog post.