Crypto Firms in Bankruptcy Proceedings 

Crypto companies currently in bankruptcy proceedings

3AC
Voyager
Celsius
FTX
BlockFi

Restructuring lawyers up big

— db (@tier10k) November 28, 2022

End of an Era

🚨 BlockFi has now filed for Chapter 11 bankruptcy.

This is a day many of us expected, but it's the end of an era for the lending and yield earning platform that had previously been able to survive (or so it seemed) the same fates as Voyager and Celsius. pic.twitter.com/MEjmO4v98a

— Mario Nawfal (@MarioNawfal) November 28, 2022

The Blockfi bankruptcy marks the end of an era. In the summer of 2021 on Twitter spaces, retail investors were shocked and angry when I suggested that Blockfi and Celsius would go under. The lure of high yields paid weekly was simply too much to resist. https://t.co/eiVTlGqPar

— Mike Alfred (@mikealfred) November 28, 2022

The Balance Sheet

I can’t wait to see this balance sheet. Did SBF stuff Blockfi with FTT in order to collateralise loans to Alameda that came from Blockfi customers? pic.twitter.com/48ziuaxiph

— Arthur Hayes (@CryptoHayes) November 28, 2022

JUST IN: BlockFi has $1-10 billion in liabilities but only $256M cash on hand

— Bitcoin Magazine (@BitcoinMagazine) November 28, 2022

Assets $256 million. Liabilities $1 to $10 billion. 

Fun Fact

Fun fact: The SEC has a $30 million unsecured claim on BlockFi

— Concoda 🥷 (@concodanomics) November 28, 2022

The SEC has a $30 million unsecured claim on BlockFi.

Inverse Cramer Strategy Yet Again 

BlockFi has officially filed for Chapter 11 Bankruptcy. This isn’t a surprise because Jim Cramer endorsed them. pic.twitter.com/tkcgfcsmct

— Inverse Cramer ETF (Not Jim Cramer) (@CramerTracker) November 28, 2022

The Wall Street Journal reports BlockFi Files for Bankruptcy as Latest Crypto Casualty

BlockFi, based in Jersey City, N.J., is only beginning to answer how its hundreds of thousands of customers will fare in an insolvency. The company’s top 10 creditors alone are owed close to $1.2 billion, according to its filings with the U.S. Bankruptcy Court in Trenton, N.J, with the total amount of liabilities likely to be much larger. 

The firm, founded in 2017 by Zac Prince and Flori Marquez and backed by Thiel Capital spinout Valar Ventures, lends money to customers using their cryptocurrency assets as collateral. Bain Capital, Tiger Global Management and a fund operated by the Winklevoss twins are also included among BlockFi’s equity investors, according to PitchBook Data Inc.

FTX, the largest crypto company to file for bankruptcy to date, has said in court papers that its 50 largest creditors are owed more than $3 billion, and its new managers are still assessing its total obligations to customers. Celsius Network LLC, a crypto lender that filed bankruptcy in July, listed $5.5 billion in total liabilities when it entered court protection, including more than $4.7 billion owed to its users. 

As of 2021, BlockFi had between $14 billion and $20 billion in customer deposits and had lent out $7.5 billion.

What Happened?

Q: How did this happen?
A: Lure customers with a promise 10% or more interest on pledged crypto, backed by nothing, then borrow against your own coin using inflated values of your coin as collateral. 

Interest is paid not in US dollars but in worthless tokens backed by nothing.  

The above Q&A is a general statement, not just BlockFi. 

Hoot of the Day

Here's the hoot of the day and it typifies crypto in general: Bankrupt BlockFi said it will focus its attention on getting assets from bankrupt FTX. 

That will drain the final $256 million in customer deposits. Somehow I expect the SEC will be first in line if anything remains. 

Was the Crypto Bubble the Worst of Its Kind?

A Bloomberg writer attempts to make that case. I strongly disagree and take the other side of the debate.

For discussion, please see Was the Crypto Bubble the Worst of Its Kind?

Final Question

What are Ethereum, Bitcoin, and US dollars backed by? 

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