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Crypto Lender BlockFi Goes Bankrupt in Aftermath of FTX

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(Bloomberg) — Lender BlockFi Inc. filed for bankruptcy, the latest digital-asset firm to collapse in the wake of crypto exchange FTX’s rapid downfall.

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BlockFi said in a statement Monday that it will use the Chapter 11 process to “focus on recovering all obligations owed to BlockFi by its counterparties, including FTX and associated corporate entities,” adding that recoveries are likely to be delayed by FTX’s own bankruptcy. Chapter 11 bankruptcy allows a company to continue operating while working out a plan to repay creditors.

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The petition, filed in New Jersey, lists BlockFi’s assets and liabilities at between $1 billion and $10 billion each. The company said in the statement that it had around $257 million of cash on hand, and is starting an “internal plan to considerably reduce expenses, including labor costs.”

Citing “a lack of clarity” over the status of bankrupt FTX and Alameda Research, the Jersey City, New Jersey-based company earlier halted withdrawals and said it was exploring “all options” with outside advisers.

Following investigations into FTX by the US Securities Exchange Commission and Commodity Futures Trading Commission over potential misuse of customer funds, it became unclear to BlockFi where funding for a credit line from FTX US and collateral on loans to Alameda, which included Robinhood Markets Inc. stock, came from, Bloomberg News reported earlier this month. BlockFi had also been in the process of shifting over its assets over to FTX for custody, but the majority of the assets had not been moved prior to FTX’s collapse.

FTX US is listed in the company’s petition as one of its top unsecured creditors, with a $275 million loan.

The company’s largest unsecured creditor, Ankura Trust Company, is owed about $729 million, according to the petition. Ankura acts as a trustee for BlockFi’s interest-bearing crypto accounts, according to its website.

“BlockFi’s Chapter 11 restructuring underscores significant asset contagion risks associated with the crypto ecosystem, and, potentially, deficient risk management processes,” said Monsur Hussain, senior director of Financial Institutions at Fitch Ratings. He said that that these restructing processes can be “notoriously lengthy” and noted that creditors owed money by Mt. Gox are only getting closer to be paid eight years after the Bitcoin exchange failed.

BlockFi’s bankruptcy shares similarities with that of FTX, according to Eric Snyder, partner and chairman of the bankruptcy department at law firm Wilk Auslander. He said in an interview that in both filings, the names of many of the key creditors have not been disclosed, which is unusual in a bankruptcy filing. Snyder also said that it will take a while to determine the total amount of money owed to creditors in both cases.

BlockFi was founded in 2017 by Zac Prince and Flori Marquez and in its early days had backing from influential Wall Street investors like Mike Novogratz and, later on, Valar Ventures, a Peter Thiel-backed venture fund as well as Winklevoss Capital, among others. It made waves in 2019 when it began providing interest-bearing accounts with returns paid in Bitcoin and Ether, with its program attracting millions of dollars in deposits right away.

The company grew during the pandemic years and had offices in New York, New Jersey, Singapore, Poland and Argentina, according to its website. Co-founder Prince in a March 2021 interview with Bloomberg said BlockFi was using proceeds from a $350-million funding round to expand into new markets and fund new products. Bain Capital Ventures and Tiger Global were among the investors in the that round.

Originally valued at $3 billion in March 2021, BlockFi looked to raise money at a reduced valuation of about $1 billion in June. The firm also faced scrutiny from financial regulators over its interest-bearing accounts and agreed to pay $100 million in penalties to the SEC and several US states in February. The SEC is listed on the bankruptcy filing as BlockFi’s fourth-largest creditor, with $30 million owed to the agency.

BlockFi worked with FTX US after it took an $80 million hit from the bad debt of crypto hedge fund Three Arrows Capital, which imploded after the TerraUSD stablecoin wipeout in May.

The company had significant exposure to the empire of companies founded by former FTX Chief Executive Officer Sam Bankman-Fried. The company received a $400 million credit line from FTX US in an agreement that also gave the company the option to acquire BlockFi through a bailout orchestrated by Bankman-Fried over the summer. BlockFi also had collateralized loans to Alameda Research, the trading firm co-founded by Bankman-Fried.

The company is the latest crypto firm to seek bankruptcy amid a prolonged slump in digital asset prices. Lenders Celsius Network LLC and Voyager Digital Holdings Inc. also filed for court protection this year.

BlockFi sold about $239 million of its own cryptocurrency and warned almost 250 workers that they would lose their jobs in the run-up to its bankruptcy filing, court papers show.

The case is BlockFi Inc., 22-19361, U.S. Bankruptcy Court for the District of New Jersey (Trenton).

–With assistance from Jeremy Hill, Vildana Hajric and Emily Nicolle.

(Adds history of the company’s entanglement with FTX beginning in the fifth paragraph.)

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Uber brings back ride share for some Canadian cities — but under a new name – Global News

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Uber brings back ride share for some Canadian cities — but under a new name  Global NewsView Full Coverage on Google News

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'Not telling us the truth': NSP customers complain utility isn't transparent about outages – CBC.ca

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Tiny wines find home in B.C.’s market, as Canadians consider reducing consumption

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VANCOUVER — Wine lovers have growing options on the shelf to enjoy their favourite beverage as producers in B.C. offer smaller container sizes.

Multiple British Columbia wineries over the last several years have begun offering their product in smaller, single-serve cans and bottles.

Along with making wine more attractive to those looking to toss some in a backpack or sip on the golf course, the petite containers leave wineries with options for a potential shift in mindset as Canadians discuss the health benefits of reducing alcohol consumption.

Vancouver-based wine consultant Kurtis Kolt said he’s watched the segment of the wine industry offering smaller bottles and cans “explode” over the last several years, particularly during the COVID-19 pandemic when people were meeting outdoors in parks and beaches and looking for something more portable to take with them.

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“You’re not taking a hit on quality, you know? In fact, if someone is only going to be having a glass or two, you’re cracking a can and it’s completely fresh, guaranteed,” he said.

It’s also an advantage for people who want to drink less, he said.

“It’s much less of a commitment to crack open a can or a small bottle or a smaller vessel than it is to open a bottle,” he said.

“Then you have to decide how quickly you’re going to go through it or end up dumping some out if you don’t finish it.”

Last month, the Canadian Centre on Substance Use and Addiction released a report funded by Health Canada saying no amount of alcohol is safe and those who consume up to two standard drinks per week face a low health risk.

That’s a significant change from the centre’s 2011 advice that said having 15 drinks per week for men and 10 drinks per week for women was low risk.

Health Canada has said it is reviewing the report.

Charlie Baessler, the managing partner at Corcelettes Estate Winery in the southern Interior, said his winery’s Santé en Cannette sparkling wine in a can was released in 2020 as a reduced alcohol, reduced sugar, low-calorie option.

“We’ve kind of gone above and beyond to attract a bit of a younger, millennial-type market segment with a fun design concept of the can and sparkling, low alcohol — all these things that have been recently a big item on the news,” he said.

Santé en Cannette is a nine per cent wine and reducing the alcohol was a way to reduce its calories, he said. The can also makes it attractive for events like a picnic or golf, is recyclable, and makes it easier for restaurants that might want to offer sparkling wine by the glass without opening an entire bottle.

At the same time, the lower alcohol content makes it an option for people who might want a glass of wine without feeling the same effect that comes from a higher alcohol content, he said.

“So the health is clearly one incentive, but I think more importantly, so was being able to enjoy a locally made product of B.C. from a boutique winery, dare I say, with a mimosa at 11 o’clock and not ruin your day,” he said.

Baessler said the winery has doubled production since the product was first released to about 30,000 cans a year, which they expect to match this year.

He said there’s naturally a market for the product but he doesn’t expect it to compete with the higher-alcohol wine.

“So this isn’t our Holy Grail. This is something that we do for fun and we’ll never compete, or never distract, from what is our core line of riper, higher-alcohol wine,” he said.

Jeff Guignard, executive director of B.C.’s Alliance of Beverage Licensees, which represents bars, pubs and private liquor stores, said the industry has seen a shift in consumers wanting options that are more convenient.

“It’s not a massive change in consumer behaviour but it is a definitely a noticeable one, which is why you see big companies responding to it,” he said.

Guignard said the latest CCSA report is creating an increased awareness and desire to become educated about responsible consumption choices, which is a good thing, but he adds it’s important for people to look at the relative risk of what they’re doing.

“If you’re eating fast food three meals a day, I don’t think having a beer or not is going to be the single most important determinant of your health,” he said.

“But from a consumer perspective, as consumer preferences change, of course beverage manufacturers respond with different packaging or different products, the same way you’ve seen in the last five years, a large number of low-alcohol or no-alcohol beverages being introduced to the market.”

While he won’t predict how much the market share could grow, Guignard said non-alcoholic beverages and low-alcoholic beverages will continue to be a significant piece of the market.

“I don’t know if it’s reached its peak or if it will grow. I just expect it to be part of the market for now on.”

This report by The Canadian Press was first published Feb. 5, 2023.

 

Ashley Joannou, The Canadian Press

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