Crypto bankruptcy filings: From 3AC to BlockFi

https://www.theblock.co/post/190354/crypto-bankruptcy-filings-from-3ac-to-blockfi

Just as the aftermath of the Terra crash in May triggered the downfall of some of the biggest crypto companies over the past six months, FTX's unraveling may kick off a new wave of bankruptcy filings, with BlockFi being the first.

Here's a look back at some of the major firms that have been forced to seek protection from creditors during this bear market — and some of the major events that have happened since.

Three Arrows Capital, July 1

Crypto hedge fund Three Arrows Capital had significant investments in Terra's native token LUNA, which fell almost to zero in May.

The firm filed for chapter 15 bankruptcy, which is typically reserved for companies that are run outside of the U.S., in a New York court. Prior to that, a court in the British Virgin Islands appointed advisory firm Teneo as its liquidator.

Documents showed that the firm owed $3.5 billion to its creditors, with Genesis Asia Pacific being the biggest one.

Voyager Digital, July 5

Days after halting withdrawals, crypto broker Voyager Digital filed for Chapter 11 bankruptcy in a New York court. The firm had issued a default notice against Three Arrows Capital after it failed to pay back over $650 million.

FTX later said that it would buy out Voyager's assets for around $1.4 billion, with then-CEO Sam Bankman-Fried being lauded for coming to the rescue of troubled crypto firms. Everything was seemingly on track, with Voyager urging creditors to vote yes on a court-approved FTX sale in October. That was, of course, until the exchange itself came crumbling down.

Since then, Voyager has reopened the bidding process for its assets and Binance CEO Changpeng Zhao told Bloomberg that Binance.US is planning to bid, after having in the past made an offer of $50 million, which lost to FTX.

Celsius, July 13

Crypto lender Celsius — another one in the roster of companies Bankman-Fried reportedly considered buying — filed its bankruptcy papers on July 13, about a month after initially freezing client withdrawals, transfers and swaps.

The company owes over $5.5 billion to its creditors and earlier this month filed a motion to extend the exclusivity period before submitting its reorganization plan, claiming that it needs extra time due to its complex nature. Among its debtors is Three Arrows Capital, which borrowed $75 million. 

The company said that it was exposed to both FTX and Alameda Research, with about 3.5 million mostly locked Serum tokens on the former and about $13 million under-collateralized loans granted to the latter.

Compute North, Sept. 22

Faced with tough mining economics, hosting provider Compute North filed for Chapter 11 bankruptcy in September. Among its major clients is bitcoin miner Marathon, which has said that its operations would remain mostly unaffected.

Meanwhile, Compute North has sold off a number of its assets including two mining facilities valued at $5 million to a former lender, $1.55 million in containers to Crusoe and two other sites to DCG's Foundry Digital.

FTX Group, Alameda Research and so many others, Nov. 11

FTX filed for bankruptcy along with over 100 affiliated corporate entities, such as Alameda Research and FTX US.

Among other things, the filings claimed that Bankman-Fried had no idea how much FTX.US owes users and that he would often send work messages that would auto-delete.

FTX owes more than $3 billion to its top 50 creditors, while in total it might have over a million creditors.

Crypto firm Genesis Global Capital said that it had $175 million locked up on the FTX platform, prompting a $140 million equity infusion from its parent company DCG. As Genesis struggles to raise fresh capital, it warned that it might have to also resort to bankruptcy. DCG took on the debt that Three Arrows Capital failed to pay Genesis, which was estimated to be over $1 billion.

FTX Digital Markets, Nov. 15

FTX Digital Markets — the Bahamas-based subsidiary of FTX Trading — separately filed for Chapter 15 bankruptcy in New York, with FTX's lawyers calling the move "a blatant attempt to avoid the supervision of this Court and to keep FTX DM isolated from the administration of the rest of the Debtors," in a filing.

FTX had said it had “credible evidence that the Bahamian government is responsible for directing unauthorized access to the Debtors’ systems" in a filing calling for one of the existing FTX bankruptcy cases in Delaware to be transferred to New York, which court-appointed liquidators for FTX in the Bahamas agreed to last week.

Tension has been building between authorities in the Bahamas and FTX’s new management, with the Securities Commission of the Bahamas (SCB) stating this week that FTX's new CEO John Ray made "intemperate and inaccurate allegations" about its treatment of FTX.

On Sunday, Bahamas Attorney General and Minister of Legal Affairs Ryan Pinder said it was "extremely regrettable" that FTX's new CEO "misrepresented the timely action taken by the Securities Commission and used inaccurate allegations."

BlockFi, Nov. 28

Crypto lender BlockFi suspended withdrawals on Nov. 10 after FTX's initial collapse while it looked for more clarity on what had happened.

In BlockFi's Chapter 11 bankruptcy filing on Nov. 28, FTX US was listed as a creditor with an unsecured claim of $275 million, seemingly from a credit line closed a few months ago.

With $257 million in cash, the company expects to have enough liquidity to keep certain operations going during the restructuring process, it said in a press release.

Last week, BlockFi put client funds into forbearance, according to a user email viewed by The Block.