BlockFi Inc. and eight of its affiliates on Monday started Chapter 11 bankruptcy proceedings as a way to stabilize its business and provide the Jersey City-based company with the opportunity to begin a comprehensive restructuring transaction that maximizes value for all clients and other stakeholders.
As part of its restructuring efforts, the company will focus on recovering all obligations owed to BlockFi by its counterparties, including FTX and associated corporate entities. Due to the recent collapse of FTX and its ensuing bankruptcy process, which remains ongoing, the company expects that recoveries from FTX will 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, the company’s financial adviser, said. “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.”
To ensure a smooth transition into Chapter 11, BlockFi is filing with the court a series of customary motions to allow the company to continue to operate its business. These “first day” motions include requests to pay employee wages and continue employee benefits without disruption, for which the company expects to receive court approval, as well as 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 company also initiated an internal plan to considerably reduce expenses, including labor costs.
Platform activity continues to be paused at this time. BlockFi has $256.9 million in cash on hand, which is expected to provide sufficient liquidity to support certain operations during the restructuring process.