FTX Collapse About To Claim Its First Victim: BlockFi May File For Bankruptcy

BlockFi, the crypto lender with a "significant exposure" to the now-bankrupt FTX and its affiliates, has retained the services of a restructuring firm that is often sought for bankruptcy proceedings and implicitly suggested to its employees the possibility of job cuts, reports claimed.

The crypto lending platform is considering filing for Chapter 11 bankruptcy protection and preparing to let some of its employees go following the collapse of FTX, Decrypt reported Tuesday, citing a source inside BlockFi. As part of exploring other possibilities moving forward, BlockFi had discussions with Binance, the world's largest cryptocurrency exchange platform, about financial help, the report added.

BlockFi conducted an all-hands meeting Monday and warned employees of the gravity of the situation the company is currently in. While it was not explicitly said, the company seemingly implied potential layoffs among its 300 full-time employees, the report revealed.

On Monday, BlockFi confirmed to its customers in a blog post that it has "engaged expert outside advisors that are helping us navigate BlockFi's next steps. Haynes and Boone continue to serve as our primary outside counsel, and BRG has been engaged as our financial advisor." BRG, or Berkeley Research Group, advertises itself as "a global consulting firm that helps organizations with assistance in disputes and investigations, corporate finance, and strategy and operations," although it is usually retained by other companies for bankruptcy proceedings.

BlockFi is just one of the many casualties of the FTX collapse. And, as the unraveling continues, it could cascade to other firms operating in the crypto space.

The International Business Times has reached out to BlockFi for an official response to the reports concerning layoffs and bankruptcy filing. We will update this story as soon as we hear from them.

BlockFi paused customer withdrawals last Thursday and announced Monday that it would keep the withdrawals paused and limit platform activities. "We determined late last week that in the current environment we could no longer operate our business as usual. Given that FTX and its affiliates are now in bankruptcy, the most prudent decision for us, in the interest of all clients, is to continue to pause many of our platform activities for now," the company said in the latest blog post detailing its current position.

"The rumors that a majority of BlockFi assets are custodied at FTX are false. That said, we do have significant exposure to FTX and associated corporate entities that encompasses obligations owed to us by Alameda, assets held at FTX.com, and undrawn amounts from our credit line with FTX.US," it continued.

"While we will continue to work on recovering all obligations owed to BlockFi, we expect that the recovery of the obligations owed to us by FTX will be delayed as FTX works through the bankruptcy process," the blog read. "At this time, withdrawals from BlockFi continue to be paused. We also continue to ask clients not to submit any deposits to BlockFi Wallet or Interest Accounts."