Crypto Firm BlockFills Files for Bankruptcy After Suspending Transactions

Cryptocurrency platform BlockFills says it is seeking bankruptcy protection after suspending client accounts last month.

“After extensive discussions with investors, clients, creditors, and other stakeholders, BlockFills has determined that a voluntary chapter 11 filing is the most responsible path forward in order to preserve the value of the business and maximize recoveries for stakeholders,” the company said in a  Sunday (March 15) statement on its website.

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

The company says it believes the bankruptcy process — “with the intention of consummating a consensual restructuring with our clients and creditors” — will give it the time and structure it needs to stabilize the business and find new sources of liquidity.

“Protecting client interests remains a priority for the firm,” the release continued. “BlockFills intends to continue engaging constructively with its clients, creditors, investors, and other stakeholders throughout the restructuring process and will provide updates as additional information becomes available.”

The news comes a little more than a month after BlockFills announced it had suspended client deposits and withdrawals. The company said it did so to protect customers and itself amid market and financial upheaval.

A report on the bankruptcy filing from Bloomberg News notes that BlockFills is one of the first crypto companies to seek Chapter 11 protection since the crash that began in October. The cryptocurrency market has lost nearly $2 trillion, leading some firms to regroup, the report added.

Bloomberg cites the example of Gemini, which last month announced it would lay off up to 25% of its staff and end its operations in Australia, the U.K. and the European Union.

In other crypto news, PYMNTS wrote recently about the banking sector’s reaction to the Federal Reserve allowing Kraken Financial, the banking arm of the Kraken crypto exchange, to access the central bank’s payment system.

“Direct access to the Fed’s payment rails potentially allows an institution like Kraken to clear transactions without relying on a commercial banking partner. In practical terms, that could mean faster settlements and fewer operational bottlenecks,” the report said. “If Kraken’s arrangement succeeds, similar firms, and especially those with specialized bank charters, may pursue their own Fed access and ultimately accelerate a disintermediation of banking.”

That’s the fear of industry groups like the Bank Policy Institute (BPI) and Independent Community Bankers of America (ICBA), which issued statements earlier this month warning of the risks of expanding direct Fed account access to institutions operating outside the normal banking regulatory framework.