Bankrupt cryptocurrency lender BlockFi Inc. plans to liquidate debts worth roughly $160 million secured by about 68,000 Bitcoin mining equipment, whereby the bid deadline is January 24. Following the failure of FTX in November and Three Arrows Capital in Q2 2022, BlockFi suffered a severe setback. It started a list of firms that went out of business soon after FTX and are still trying to get their customers’ money back by declaring bankruptcy.
Where did it all go wrong for BlockFi?
It is stated that the Jersey City, New Jersey-based firm began the loan bidding process last year before seeking protection from creditors in November. According to sources, some loans have already fallen behind and looked to be undercollateralized, considering the current costs of Bitcoin mining equipment.
Several lenders of digital assets, including exchange FTX, hedge fund Three Arrows Capital, and stablecoin project Terra Luna, have declared bankruptcy in recent months. BlockFi is one of them. Before these developments, through loans secured by the computer rigs, the lender was a significant funder for Bitcoin miners, who low Bitcoin prices and rising power costs have hurt.
As a result of the extreme volatility of Bitcoin values, traditional lenders avoided lending to Bitcoin mining firms; however, crypto-native lenders filled that gap. Since the previous bull run in the cryptocurrency market, around $4 billion has been generated through such loans. New York Digital Investment Group, Celsius Network, Galaxy Digital, and Digital Currency Group’s Foundry are among the more significant financiers of cryptocurrency mining businesses.
A growing market for distressed assets has been formed by struggling Bitcoin miners and insolvent lenders. Jihan Wu, a Chinese billionaire, has backed the cryptocurrency mining company Bitdeer, which has established a $250 million distressed fund. Grayscale, the most prominent digital asset manager, has launched an entity to invest in Bitcoin mining equipment alongside its sister company, Foundry, to take advantage of the struggling mining industry.
Is Celsius also selling?
In contrast to BlockFi, it was rumored that cryptocurrency lender Celsius Network was selling its mining equipment. The mining division of the insolvent company stated in a filing with the bankruptcy court on January 13 that it was seeking to sell around 2,687 rigs of Bitcoin mining equipment to an investment firm called Touzi Capital.
Letitia James, the attorney general of New York, filed a lawsuit against Alex Mashinsky, the founder and CEO of the failed lending company. James said that Alex had defrauded hundreds of thousands of consumers and that he was trying to stop him from doing business in New York again and pay back the investors’ losses.
This article has been originally published at: https://blockchainreporter.net/blockfi-to-sell-equipment-to-counter-bankruptcy-crisis/?SNAPI