Files voluntary petitions for Chapter 11 protection to preserve client value and pursue recoveries on counterparty obligations
JERSEY CITY, N.J.--(BUSINESS WIRE)--BlockFi Inc. and eight of its affiliates (“BlockFi” or “the Company”) today commenced voluntary cases under Chapter 11 of the U.S. Bankruptcy Code in the United States Bankruptcy Court for the District of New Jersey (“the Court”) to stabilize its business and provide the Company with the opportunity to consummate 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 (“FTX”). 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,” said Mark Renzi of Berkeley Research Group, the Company’s financial advisor. “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 today also initiated an internal plan to considerably reduce expenses, including labor costs.
Platform activity continues to be paused at this time. BlockFi has US$256.9 million in cash on hand, which is expected to provide sufficient liquidity to support certain operations during the restructuring process.
In parallel with these chapter 11 cases, BlockFi International Ltd. a Bermuda incorporated company, filed a petition with the Supreme Court of Bermuda for the appointment of joint provisional liquidators pursuant to section 161(e) of Bermuda’s Companies Act, 1981 in the near term. BlockFi currently anticipates that client claims will be addressed through the Chapter 11 process.
Haynes and Boone LLP, Kirkland & Ellis LLP, and Cole Schotz P.C. are serving as legal counsel, Moelis & Company is serving as investment banker, and Berkeley Research Group is serving as financial advisor to the Company. C Street Advisory Group, LLC is serving as strategic restructuring and communications advisor to the Company.
Founded in 2017, BlockFi is building a bridge between digital assets and traditional financial and wealth management products to advance the overall digital asset ecosystem for individual and institutional investors.
The statements contained herein may contain certain forward-looking statements relating to the Company that are based on the beliefs of the Company’s management as well as assumptions made by and information currently available to the Company’s management. These forward-looking statements are, by their nature, subject to significant risks and uncertainties. These forward-looking statements include, without limitation, statements relating to the Company’s business prospects, future developments, trends and conditions in the industry and geographical markets in which the Company operates, its strategies, plans, objectives and goals, its ability to control costs, and statements relating to prices, volumes, operations, margins, overall market trends, and risk management and may include, for example, statements regarding our pursuing protection under Chapter 11 of the Bankruptcy Code (the “Chapter 11 Cases”), the Company’s ability to complete the restructuring and its ability to continue operating its business while the Chapter 11 Cases are pending.
When used herein, the words “anticipate”, “believe”, “could”, “estimate”, “expect”, “going forward”, “intend”, “may”, “ought to”, “plan”, “project”, “seek”, “should”, “will”, “would” and similar expressions, as they relate to the Company or the Company’s management, are intended to identify forward-looking statements. These forward-looking statements reflect the Company’s views at the time such statements were made with respect to future events and are not a guarantee of future performance or developments. You are strongly cautioned that reliance on any forward-looking statements involves known and unknown risks and uncertainties, including risks and uncertainties regarding the Company’s ability to successfully complete a restructuring under Chapter 11, including: consummation of a restructuring; potential adverse effects of the Chapter 11 Cases on the Company’s liquidity and results of operations; the Company’s ability to obtain timely approval by the bankruptcy court with respect to the motions filed in the Chapter 11 Cases; objections or other pleadings filed that could protract the Chapter 11 Cases; employee attrition and the Company’s ability to retain key personnel; the Company’s ability to maintain relationships with vendors, clients, employees and other third parties and regulatory authorities as a result of the Chapter 11 Cases; the effects of the Chapter 11 Cases on the Company and on the interests of various constituents; the bankruptcy court’s rulings in the Chapter 11 Cases, including the outcome of the Chapter 11 Cases generally; the length of time that the Company will operate under Chapter 11 protection and the continued availability of operating capital during the pendency of the Chapter 11 Cases; risks associated with third party motions in the Chapter 11 Cases, which may interfere with the Company’s ability to consummate the restructuring or an alternative restructuring transaction; increased administrative and legal costs related to the Chapter 11 process; potential delays in the Chapter 11 process due to the effects of the COVID-19 virus; and other litigation and inherent risks involved in a bankruptcy process. Actual results and events may differ materially from information contained in the forward-looking statements as a result of a number of factors, including any changes in the laws, rules and regulations relating to any aspects of the Company’s business operations, general economic, market and business conditions, including capital market developments, changes or volatility in interest rates, foreign exchange rates, equity prices or other rates or prices, the actions and developments of the Company’s competitors and the effects of competition on the demand for, and price of, the Company’s products and services, various business opportunities that the Company may or may not pursue, the Company’s ability to identify, measure, monitor and control risks in the Company’s business, including its ability to manage and adapt its overall risk profile and risk management practices, its ability to properly price its products and services, and factors beyond the Company’s control. The Company is under no obligation, and does not intend, to update or otherwise revise such forward-looking statements, whether as a result of new information, future events or otherwise. As a result of these and other risks, uncertainties and assumptions, forward-looking events and circumstances discussed herein might not occur in the way the Company expects, or at all. Accordingly, you should not place reliance on any forward-looking information or statements. All forward-looking statements herein are qualified by reference to the cautionary statements set forth in this section.
C Street Advisory Group