Despite efforts to overcome challenges in what some are perceiving as a crypto crisis, two more cryptocurrency exchanges BlockFi and Bitfront have filed for bankruptcy.
Cryptocurrencies faced a tough chapter in 2022, with crypto prices falling, two large cryptocurrency trading platforms Voyager and Celsius filing for bankruptcy in July, and FTX experiencing a significant liquidity issue before declaring bankruptcy and sliding into Chapter 11 status.
BlockFi in turmoil over FTX
Many cryptocurrency companies are being impacted by FTX’s demise, including BlockFi, which has recently been valued at $4.8 billion. The cryptocurrency industry is still feeling the effects of FTX’s collapse and lender BlockFi is amongst the latest exchanges to apply for Chapter 11 bankruptcy protection for 2022.
BlockFi, a company situated in New Jersey and owned by former Finance Executive Zac Prince, claimed in a bankruptcy petition that a liquidity crisis was brought on by its significant exposure to FTX.
In a statement, BlockFi said: “This action follows the shocking events surrounding FTX and associated corporate entities and the difficult but necessary decision we made, as a result, to pause most activities on our platform.
“Since the pause, our team has explored every strategic option and alternative available to us and has remained laser-focused on our primary objective of doing the best we can for our clients.
“These Chapter 11 cases will enable BlockFi to stabilise the business and provide BlockFi with the opportunity to consummate a reorganisation plan that maximises value for all stakeholders, including our valued clients.”
Tuesday will mark the first bankruptcy hearing for BlockFi.
Embattled Bitfront exchange collapses
The present market has forced Bitfront to close, the exchange stated. According to Bitfront, the action has nothing to do with current concerns over specific cryptocurrency exchanges that have been accused of “misconduct.”
The exchange claimed that it would be closing its operations in order to focus on expanding the LINE blockchain environment and the LINK token economy. Bitfront is backed by the LINE Corporation of Japan.
According to a Bitfront representative “despite our efforts to overcome the challenges in this rapidly-evolving industry, we have regretfully determined that we need to shut down BITFRONT in order to continue growing the LINE blockchain ecosystem and LINK token economy.”
“From the beginning, we have done our best to be a leader in the blockchain industry.”
The company notice stated that beginning on November 28, Bitfront would no longer accept new signups or credit card payments. By year’s end, trading on Bitfront will be stopped, and withdrawals will stop on March 31, 2023.
Chapter 11 bankruptcy proceedings
Both Bitfront and BlockFi filed for Chapter 11 bankruptcy protection. The proposed new plan of the corporation is subject to review by the creditors in a chapter 11 bankruptcy.
A comprehensive schedule of assets and liabilities, as well as other financial documents and reports, must be provided by the insolvent corporation. The business, attorneys, and a bankruptcy court work to determine who receives what throughout the bankruptcy process.
The court can either dismiss the entire case or convert it to a Chapter 7 bankruptcy if the restructuring plan is rejected.