Breaking: BlockFi reportedly posts uncensored financials revealing $1.2 billion FTX exposure

January 25, 2023 Coin Telegraph

BlockFi to sell $160M in Bitcoin miner-backed loans: Report

January 24, 2023 Coin Telegraph

BlockFi to sell 0M in Bitcoin miner-backed loans: Report

Bankruptcy

The deadline for bidders to submit offers for the Bitcoin-machine-backed loans is set for Jan. 24.

Bankrupt crypto lending firm BlockFi has plans to sell off $160 million in loans backed by around 68,000 Bitcoin mining machines as part of bankruptcy proceedings, according to reports.

In a Bloomberg report on Jan. 24, two people “familiar with the matter” claim that BlockFi started the process of selling off the loans last year.

The crypto lender filed for Chapter 11 bankruptcy in Nov. 2022, citing its significant exposure to the now-defunct crypto exchange FTX for its downfall.

However, some of these loans have already defaulted since then and could be undercollateralized given the decline in the price of Bitcoin mining equipment, according to the sources, adding the last day for bidders to submit offers for the loans is Jan. 24.

In comments to Cointelegraph, crypto lawyer Harrison Dell, director at Australian law firm Cadena Legal explained that if Bitcoin mining equipment used as collateral is worth less than the value of the loans, the loans are “not worth their paper value anymore to BlockFi.”

Dell said that the people bidding for the debts are most “likely” to be debt collection businesses buying for “cents on the dollar.”

He added that selling the debt is likely “all that the administrators” for BlockFi can salvage for these assets.

Dell also suggested that this is just the beginning of what’s to come for the crypto industry. He noted:

“This is just the start of the asset sales from BlockFi and other crypto firms in Chapter 11 bankruptcy in the US.”

Cointelegraph reached out to BlockFi for comment but did not receive a response by the time of publication.

BlockFi’s attempt to liquidate its loans is likely part of efforts to pay off its creditors, which according to its bankruptcy filing in Nov. 2022, the company has over 100,000 creditors.

At the time of its bankruptcy, it was reported that BlockFi sold $239 million of its own cryptocurrency assets to cover the bankruptcy expenses and warned approximately 70% of its staff that they would lose their jobs.

Earlier this week, BlockFi petitioned the court in a Jan. 23 declaration to release funds to allow bonuses for key employees in a bid to retain them amid the Chapter 11 bankruptcy proceedings.

BlockFi’s chief people officer Megan Crowell told the court that without financial incentives, it’s unlikely the company will be able to retain its employees.

Crowell said it is highly likely many staff will leave the company without competitive compensation, noting that it would add further financial impact to the company down the road.

BlockFi exec argues bankruptcy court should approve bonuses to retain talent

January 23, 2023 Coin Telegraph

Bankruptcy

According to Megan Crowell, losing certain employees could "severely [limit] the debtors’ options" amid bankruptcy proceedings.

Megan Crowell, the chief people officer at crypto lending firm BlockFi, has petitioned a court to allow bonuses for “key employees” amid Chapter 11 bankruptcy proceedings.

In a Jan. 23 declaration for United State Bankruptcy Court in the District of New Jersey, Crowell said without giving certain financial incentives, BlockFi might be unable to retain employees in a “highly competitive” crypto industry. According to the BlockFi executive, many staff were “highly likely to leave the company” amid the Chapter 11 process without “competitive compensation”, potentially adding to costs down the road.

“The war for talent remains active, and the Participants have many opportunities inside and outside the cryptocurrency sector,” said Crowell. “Individuals with cryptocurrency experience are attractive to employers in the finance, technology, and payment platform industries broadly, among others, especially as these industries adapt their products and services to incorporate cryptocurrency and or related technologies.”

She added:

“In the event additional Participants resign, I believe that the Debtors would struggle to adequately source candidates who could operate the BlockFi platform effectively, severely limiting the Debtors’ options in these chapter 11 cases. Moreover, hiring new employees would require the Debtors to incur significant operational and financial costs.”

BlockFi filed for bankruptcy on Nov. 28, saying at the time the firm had roughly $257 million on hand and filed a motion to “establish a Key Employee Retention Plan to ensure the company retains trained internal resources for business-critical functions” as the works did not qualify for severance. According to Crowell, the proposed plan would offer employees bonuses of 20-50% of their salaries should they remain at the firm as of Jan. 31.

Crowell reported that certain “critical” employees had already accepted offers at Google, Block, and Walmart following the bankruptcy filing in November, in some cases “for compensation significantly above their current compensation”. Her LinkedIn showed she joined BlockFi in July 2019, working in various roles related to recruiting talent.

Many crypto firms including FTX, Celsius Network, Genesis, and Voyager Digital filed for Chapter 11 bankruptcy in the last year, with many users reporting losses totaling in the millions of dollars.

BlockFi plans to file assets and liabilities for bankruptcy case on Jan. 11

January 9, 2023 Coin Telegraph

Assets

The company claimed that no members of the BlockFi management team had withdrawn any crypto from the platform since October 2022.

Crypto lending firm BlockFi has announced it will disclose information on its assets and liabilities as well as payments received prior to its bankruptcy filing in November.

In a Jan. 9 Twitter thread, BlockFi said it had filed a presentation for its stakeholders detailing plans for future court filings and a rundown of the bankruptcy proceedings. According to the lending firm, the company reached out to 106 potential buyers shortly after its first bankruptcy hearing in November and will ask for the court’s approval regarding the bidding process on Jan. 30.

BlockFi expects to file both its Schedules of Assets and Liabilities and its Statement of Financial Affairs with the Court on January 11, 2023.
— BlockFi (@BlockFi) January 9, 2023

Specifically, the company claimed that no members of the BlockFi management team had withdrawn any crypto from the platform since Oct. 14 nor “made a withdrawal greater than 0.2 BTC in value at any time” after Aug. 17. The firm also noted it had “increase[d] base salaries and ma[de] retention payments” for certain employees following a $400-million revolving credit facility from FTX US in July.

BlockFi said it planned to file its assets and liabilities, along with a statement of financial affairs on Jan 11. The announcement followed the United States Department of Justice notifying the court handling the BlockFi bankruptcy that it had seized more than 55 million shares of Robinhood — roughly $450 at the time of publication — as part of the criminal case against crypto exchange FTX and its executives. BlockFi was one of the parties claiming rights to the shares given certain financial ties to FTX.

Crypto firms FTX, Celsius Network, BlockFi and Voyager Digital all filed for Chapter 11 bankruptcy in 2022, with many users reporting losses totaling in millions of dollars. The next public hearing for FTX’s bankruptcy case is scheduled for Jan. 11, while BlockFi has an omnibus hearing on Jan. 17.

Sam Bankman-Fried Spars With FTX Debtors Over Seized Robinhood Shares Valued at Over $460,000,000

January 7, 2023 The Daily Hodl

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SBF borrowed $546M from Alameda to fund Robinhood share purchase

December 28, 2022 Coin Telegraph

SBF borrowed 6M from Alameda to fund Robinhood share purchase

affidavit

An affidavit by the FTX founder revealed Alameda funded the purchase of Robinhood shares which were later used as collateral for Alameda to secure a loan from BlockFi.

Sam Bankman-Fried, the disgraced founder of cryptocurrency exchange FTX, borrowed over $546 million from the exchange’s sister firm Alameda Research to fund his purchase of Robinhood shares.

Those same shares were later used by Bankman-Fried as collateral for a loan taken by Alameda from BlockFi, one of the entities that are laying claim to the shares.

An affidavit by Bankman-Fried filed in the Antigua and Barbuda High Court on Dec. 12 — the day of his arrest — and made public on Dec. 27, revealed he and FTX co-founder Zixiao “Gary” Wang took out the loans from Alameda through four promissory notes between April and May 2022.

On Apr. 30 loans of around $316.6 million and $35.1 million were given to Bankman-Fried and Wang respectively. Later, two loans of around $175 million and $19.4 million were given to Bankman-Fried on May. 15.

The loans were used to fund Bankman-Fried’s Antiguan-based shell company Emergent Fidelity Technologies Ltd. which acquired a 7.6% stake in brokerage firm Robinhood in May at a price of $648 million at the time.

He added that if the sum paid by Emergent for the shares was more than the stated $546 million he has “not [sic] doubt that such additional sum was borrowed by Gary and I” to fund the acquisition of the Robinhood shares.

The revelation of the loans could complicate the ongoing legal tug of war for the over 56 million shares in Robinhood that are now worth around $430 million.

Embattled crypto lender BlockFi is suing Bankman-Fried’s Emergent for the Robinhood shares that were allegedly pledged as collateral for BlockFi’s loans to Alameda on Nov. 9.

FTX stepped in on Dec. 23, asking for assistance from a U.S. bankruptcy judge to prevent BlockFi from claiming the shares. It said the shares are owned by Alameda and insisted FTX companies should keep the Robinhood stake while investigations continue into other claims of their ownership.

Additionally, Bankman-Fried and FTX creditor Yonathan Ben Shimon are laying claim to the shares.

Previously, FTX’s Chapter 11 bankruptcy filings in the United States revealed Bankman-Fried was on the receiving end of a $1 billion personal loan from Alameda.

Former Alameda CEO Caroline Ellison said on Dec. 23 as part of her plea deal that “Alameda was borrowing funds that FTX’s customers had deposited onto the exchange.”

FTX Attempts to Freeze Robinhood Shares as Creditors Swarm to Scoop $450M in HOOD Stock

December 23, 2022 Bitcoin.com

California regulators order MyConstant to cease crypto-lending services

December 22, 2022 Coin Telegraph

Blockfi

The California DFPI warned in July that it would be cracking down on crypto interest account providers in the state.

The California Department of Financial Protection and Innovation (DFPI) has ordered crypto lending platform MyConstant to cease offering a number of its crypto-related products over alleged state securities law violations.

The DFPI stated in a press release on Dec. 21 that it has ordered MyConstant to “desist and refrain” from offering its peer-to-peer loan brokering service and interest-bearing crypto asset accounts, which it says are in violation of the California Securities Law and California Consumer Financial Protection Law.

The DPFI alleged that MyConstant’s offering and selling of its peer-to-peer lending service called “Loan Matching Service” violates one of the state’s financial codes.

It also alleged that MyConstant engaged in “unlicensed loan brokering,” as the platform induced lenders to lend without proper licenses.

The regulators also had a problem with the crypto lender’s fixed interest-beating crypto asset products, whereby a customer deposits crypto assets (such as stablecoins and fiat) and are promised a fixed annual percentage interest return.

It said that these were examples where MyConstant offered and sold unqualified, non-exempt securities.

In July, the regulator said it was investigating multiple crypto interest account providers to determine whether they are “violating laws under the Department’s jurisdiction.”

DFPI first announced it was investigating MyConstant in a press release on Dec. 5 stating that MyConstant is “not licensed” by DFPI to operate in California.

The recent action comes only a month after the California-based company appeared to have fallen into hard times, announcing on Nov. 17 that “rapidly deteriorating market conditions” prompted heavy withdrawals and that it was “unable to continue to operate our business as usual.”

The platform at the time added that it had limited its business activity, including pausing withdrawals, and that: “No deposit or investment request will be processed at this time.”

The platform has been providing users with updates on its website since then, including an updated plan sent to users on Dec. 15 which includes a financial overview, liquidation schedule, estimated recovery, and next steps.

At the time, the platform said it will continue to administer its crypto-backed loans, including ensuring borrower compliance, processing loan repayments, returning borrowers' collateral (when their loans are paid in full), and liquidating borrowers' collateral in the event of default.

BlockFi files motion to return frozen crypto to wallet users

December 20, 2022 Coin Telegraph

Blockfi

Crypto lender BlockFi has asked a U.S. Bankruptcy Court for the authority to return the crypto held in BlockFi Wallets to users.

Bankrupt crypto lending platform BlockFi has filed a motion requesting authority from the United States Bankruptcy Court to allow its users to withdraw digital assets currently locked up in BlockFi Wallets.

In a motion filed on Dec .19 with the U.S. Bankruptcy Court in the District of New Jersey, the lender asked the court for authority to honor client withdrawals from wallet accounts as of the platform’s pause on Nov. 10.

The court documents also request permission to update the user interface to properly reflect transactions as of the platform’s pause.

In a widely shared email sent to affected users, BlockFi called the motion an “important step toward our goal of returning assets to clients through our chapter 11 cases," adding

“It is our belief that clients unambiguously own the digital assets in their BlockFi Wallet Accounts.”

According to BlockFi, this motion will not impact withdrawals or transfers from BlockFi Interest Accounts, which remain paused at this time.

The lending platform has also signaled intentions to seek “similar relief from the Supreme Court of Bermuda with respect to BlockFi Wallet Accounts held at BlockFi International Ltd.”

BlockFi International is a subsidiary of the company based in Bermuda which runs its non-U.S. operations.

Crypto blogger Tiffany Fong shared the communication sent to her by BlockFi on Dec. 19, commenting that the embattled firm appears to be moving much faster than Celsius, which filed for bankruptcy over five months ago in July as opposed to BlockFi's bankruptcy filing in November.

WOW, @BlockFi has already filed a motion requesting client withdrawals for assets held in BlockFi Wallet Accounts. S/O to BlockFi for moving exponentially more quickly than @CelsiusNetwork in Ch 11. pic.twitter.com/JvtWzMklNA
— Tiffany Fong (@TiffanyFong_) December 20, 2022

According to the court documents, a hearing to decide if the motion will be granted is scheduled for Jan. 9, 2023.

While a separate hearing regarding wallet accounts held at BlockFi International Ltd is scheduled to go before the Supreme Court of Bermuda on Jan. 13, 2023.

BlockFi halted client withdrawals and requested clients not to deposit to BlockFi wallets or Interest Accounts on Nov. 11, citing a lack of clarity around FTX.

By Nov. 28, BlockFi filed for Chapter 11 bankruptcy in the United States Bankruptcy Court for the District of New Jersey for the company and its eight subsidiaries. BlockFi International filed for bankruptcy with the Supreme Court of Bermuda on the same day.

Blockfi

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