Crypto lender BlockFi recordsdata for Chapter 11 By Reuters

(Reuters) – U.S. cryptocurrency lender BlockFi stated on Monday it had filed for Chapter 11 chapter safety together with eight associates in a New Jersey courtroom, the newest casualty since FTX’s collapse earlier this month triggered instability within the crypto market.

In a courtroom submitting, New Jersey-based BlockFi stated it owes cash to greater than 100,000 collectors. It listed crypto alternate FTX as its second-largest creditor, with $275 million owed on a mortgage prolonged earlier this yr.

COMMENTS:

MARTHA REYES-HULME, HEAD OF RESEARCH, BEQUANT, LONDON

“The BlockFi chapter is a tragic chapter within the quick historical past of our trade that has compelled individuals to be extra aware of danger administration, counterparty danger, and governance. Our shoppers have at all times used diversification to attenuate alternate danger however now we’re seeing many pull again within the quick time period and search higher options, particularly round custody, to guard their property. We’re working carefully with them. In the end it is going to be higher for everybody. We’re nonetheless seeing curiosity to onboard, even in these troublesome instances, which is reassuring in addition to curiosity from mainstream establishments that attended our convention final week.”

MONSUR HUSSAIN, SENIOR DIRECTOR, FITCH RATINGS, LONDON

“BlockFi’s Chapter 11 restructuring underscores vital asset contagion dangers related to the crypto ecosystem, and, probably, poor danger administration processes. Restructuring processes might be notoriously prolonged – Mt Gox’s collectors are solely getting nearer to being paid eight years after the operation failed.”

MARK CONNORS, 3iQ DIGITAL ASSET MANAGEMENT, TORONTO

“Throughout a interval of unwinding and consolidation, which is the place we’re, leveraged methods are extra in danger. We’re making an attempt to separate the wheat from the chaff right here, and I don’t assume many individuals had been shocked by the BlockFi submitting… BlockFi obtained a $250mm mortgage in Q2, from FTX – seemingly in self curiosity to assist hold overleveraged Alameda afloat.  So, in the present day’s motion was not surprising.”

“Institutional funding is stalled proper now within the wake of this. The primary evaluation might be, what failed? We imagine it’s the unregulated centralized entities. So establishments are going to return and say, did we spend money on the incorrect individuals within the VC stage? I feel that is going to be an enormous sure. Does this imply that bitcoin and , the 2 primary protocols that account for 60-odd % of the digital asset area are flawed? There’s no institutional investor who can say these protocols failed, or don’t maintain the identical promise they did earlier than the FTX failure. So there are establishments that stay , however regulators have to outline the state of play for establishments to comply with.”

“There are (crypto) lending fashions that make sense. The decentralized finance fashions used correct collateralization they usually’re intact. Some centralized fashions didn’t. I feel you are seeing the fashions with the weak lungs fail first. If an organization offers you 18% yield, you higher know very well the place that yield is coming from.”

“FTX US, is I feel the second largest creditor in BlockFi. However the query is, was that denominated within the FTT token or was it money? In different bankruptcies, you’d have exhausting property or U.S. {dollars} … we don’t know in the event that they loaned (FTT) to BlockFi however we’re asking that questions for good motive.”

CONOR RYDER, RESEARCH ANALYST, KAIKO, DUBLIN

“The BlockFi submitting is the newest in a string of contagion occasions after FTX, and arguably continued fallout from Celsius/Three Arrows Capital final summer time. It was yet one more instance of uncared for danger administration when costs had been going up, as crypto winter hit people who took on probably the most counterparty danger are getting uncovered.”

“From a buyer standpoint it serves as one other reminder to be skeptical of any crypto yield merchandise on provide, notably people who sound too good to be true. That must be the largest pink flag now that an organization is taking over added danger along with your property.”