BlockFi: Hiring Advisers, Says Goal Is “Maximizing Value” For Clients
In an email to clients, BlockFi admits significant exposure to FTX, says it has engaged financial advisers and that its aim is “maximizing value for all of our clients.”
In its first communication to customers since it paused withdrawals, BlockFi says it is “deeply saddened to see the devastation that is cascading across an industry that we love and believe in, touching the lives of so many people.”
Although it admits exposure to FTX and Alameda, the crypto platform says rumors that a majority of BlockFi assets are custodied at FTX are false. It also, curiously, implies that the infamous line of credit provided by FTX earlier this year, still has undrawn amounts – which it will be pursuing. “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.”
What’s next for BlockFi?
Like other failed lending platforms Celsius, Vauld, Hodlnaut and Voyager before it, BlockFi says it is now exploring a number of scenarios around how to proceed. It says it has “the necessary liquidity to explore all options” which means it can continue to pay its staff and its external advisors, but the company has not revealed the magnitude of its financial shortfall in terms of being able to return client funds.
The company says it has hired expert financial advisors including BRG to assist it in navigating its next step. Haynes and Boone continues to serve as BlockFi’s primary outside counsel.
How Long Before BlockFi Clients Receive Their Funds?
To date, none of the crypto banking platforms that have failed this year have returned any funds to depositors and many have filed for Chapter 11 bankruptcy or similar legal protection in other territories outside of the United States.
Chapter 11 is not a liquidation – instead it gives the failed business court protection from its creditors while it comes up with a plan to return the most value possible to affected stakeholders. A typical Chapter 11 bankruptcy in the US takes between three to five years to resolve.
BlockFi’s says its top priority “remains doing the best we can for our clients,” and it is exploring every strategic option available to it. With liquidity in the crypto space in short supply and no bail out/buy out likely, a Chapter 11 filing will likely be the best option for the company given the prolonged protection it offers from legal action. This option is even more likely given FTX has filed for Chapter 11 bankruptcy and a major part of BlockFi’s strategy for reclaiming assets is dependant on how much it will see returned from FTX in its bankruptcy proceeding – which will likely take several years.
