Cryptocurrency lending firm Blockfills, along with its operating company Reliz Ltd. and two affiliated entities, has filed for Chapter 11 bankruptcy in a Delaware court.

 

According to the team, the filing was voluntary and in the best interests of the company and its customers. The decision, the firm said, was made after extensive discussions with investors, clients, creditors, and other stakeholders.

 

“This filing will allow the firm to implement an orderly restructuring while maintaining transparency and oversight through the court-supervised process,” Blockfills said.

 

 

 

"The bankruptcy filing was the best course of action after evaluating all available strategic and financial alternatives,” Blockfills said. The company now plans to restructure and stabilize the business while pursuing additional liquidity and recovery options.

 

In the filing, Blockfills estimated its assets at between $50 million and $100 million and its liabilities at between $100 million and $500 million, leaving a potential deficit of up to $450 million.

 

 

Blockfills Many Struggles 

The past few months have been tough for Blockfills. In February, the firm suspended customer withdrawals and deposits. According to the team, the move was intended to protect both the firm and its clients, given the impact of challenging market conditions on its liquidity.

 

Blockfills also suffered huge financial losses, reportedly losing about $75 million from its lending and other crypto services. The firm is facing a lawsuit from Dominion Capital, which alleges that it mishandled and commingled customers’ funds, prompting a U.S. federal judge to freeze approximately 70.6 bitcoins linked to the company.

 

 

Past Bankruptcy Cases

Blockfill isn’t the first crypto lending firm to file for bankruptcy. In 2022, Celsius Network, one of the largest crypto lenders, froze withdrawals in mid-year and later filed for Chapter 11 bankruptcy in July amid harsh market conditions. 

 

Court filings revealed the company had about $4.3 billion in assets and $5.5 billion in liabilities, leaving a deficit of roughly $1.2 billion. Celsius eventually shut down in February 2024.

 

Several other crypto lending companies also filed for bankruptcy in 2022, including BlockFi, Voyager Digital, Three Arrows Capital, and Hodlnaut. Some of these companies attempted to restructure and resume operations, but none succeeded, with all eventually shutting down.

 

 

A Coinbase shareholder has filed a derivative lawsuit against several top executives and board members of the crypto exchange, alleging compliance and disclosure failures by the company’s leadership. 

 

On Tuesday, Kevin Meehan, one of Coinbase’s shareholders, filed a complaint in a U.S. district court in New Jersey. The court filing cited several of Coinbase’s top directors, including CEO Brian Armstrong, co-founder Fred Ehrsam, Chief Legal Officer Paul Grewal, and Chief Financial Officer Alesia Haas, among other executives.

 

Image credit: PACER

 

 

According to the filing, the plaintiff accused the defendants of making false and misleading statements between April 2021, when the exchange became a publicly traded company, and June 2023. The complainant alleged that a compliance failure by the exchange's leadership exposed the company to several stringent regulatory actions.

 

On behalf of Coinbase, the complainant, Kevin, is seeking damages, requesting that the court implement corporate governance reforms, and requesting recovery of any profits the exchange's leadership may have obtained during the period when the exchange faced these compliance cases.

 

However, since this is a shareholder derivative lawsuit, any financial recovery from Coinbase's directors will go to Coinbase rather than directly to the shareholders.

 

 

Coinbase Battle With Compliance

Over the past few years, Coinbase has faced several legal and compliance challenges, paying millions of dollars in damages and penalties. 

 

In January 2023, the New York State Department of Financial Services sued the exchange for major failures in its Anti-Money Laundering (AML) program. The regulator accused Coinbase of having weak Know-Your-Customer (KYC) checks and failing to properly review suspicious transactions.

 

As part of the settlement, Coinbase agreed to pay $100 million: $50 million in penalties and $50 million to improve its compliance checks and systems.

 

In June 2023, Coinbase was hit with a $5 million penalty by the New Jersey Bureau of Securities. The regulator accused the exchange of allowing the trading of unregistered securities on its platform, prompting several other states to impose restrictions on its staking services at the time.

 

Coinbase has also faced legal challenges from the U.S. Securities and Exchange Commission (SEC). In 2023, the SEC filed a lawsuit against the company, alleging it operated an unregistered exchange. Following the announcement, Coinbase’s stock dropped sharply, falling from over $60 to under $50 within minutes of the news breaking.