It appears that BlockFi started a bidding process for Bitcoin miner-backed loans last year.
BlockFi, a now-bankrupt crypto lender established in 2017, is reportedly planning to sell Bitcoin (BTC) mining machines-backed loans.
According to the Bloomberg report shared on January 24th, the news was revealed by “two people familiar with the matter.”
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In particular, BlockFi is looking to sell $160 million in loans backed by 68,000 Bitcoin mining machines.
It appears that it is not a new practice for BlockFi. The same Bloomberg report noted that the New Jersey-based crypto lender started the loan bidding process last year.
However, it appears that some of the loans have already defaulted. Based on some sources, the loans could be undercollateralized as the price of Bitcoin mining equipment has declined significantly. Despite that, bidders had until January 24th to submit their offers.
Director of the law firm Cadena Legal and crypto lawyer Harrison Dell claimed that if Bitcoin mining machines used as collateral are worth less than the loans, the latter lose their value completely. Moreover, Dell added:
This is just the start of the asset sales from BlockFi and other crypto firms in Chapter 11 bankruptcy in the US.
It is worth noting that BlockFi filed for Chapter 11 bankruptcy in the United States Bankruptcy Court for the District of New Jersey at the end of November. The company claimed that it had a “significant exposure to FTX and associated corporate entities.”
BlockFi’s bankruptcy filings revealed that the crypto lender had over 100,000 creditors and liabilities of between $1 and $10 billion. It can be assumed that, with the Bitcoin mining machine-backed loans, BlockFi is trying to gather the funds needed to repay its creditors.
At the time of bankruptcy filing, BlockFi reportedly sold over $239 million worth of crypto to cover bankruptcy expenses. Moreover, the company had allegedly informed around 250 out of 370 employees about possible layoffs.