Bankrupt Lender BlockFi Will Sell Loans Backed By Bitcoin Mining Machines

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(Bloomberg) — Bankrupt crypto lender BlockFi Inc. plans to sell around $160 million in loans backed by around 68,000 Bitcoin mining machines, according to two people familiar with the matter.

The Jersey City, New Jersey-based company, which filed for creditor protection in November, began the bidding process for the loans last year, the people said. Some of the loans have already defaulted and appear to be under-secured given current Bitcoin mining equipment prices, people say. BlockFi did not immediately return a message seeking comment.

BlockFi is among several digital asset lenders that have filed for bankruptcy due to the collapse of major crypto firms such as FTX exchange, hedge fund Three Arrows Capital, and stablecoin project Terra Luna over the past year. The lender was a major financier for Bitcoin miners, who have been battered by low Bitcoin prices and soaring electricity costs, thanks to loans backed by computing platforms.

While traditional lenders have steered clear of Bitcoin mining companies due to high Bitcoin price volatility, crypto-native lenders have filled that void. Nearly $4 billion has been raised through these loans since the last bull run in the crypto market. Other top lenders for crypto mining companies include New York Digital Investment Group, Celsius Network, Galaxy Digital, and Digital Currency Groups Foundry.

Struggling bitcoin miners and bankrupt lenders have created a booming market for distressed assets. Crypto-mining firm Bitdeer, backed by Chinese billionaire Jihan Wu, has set up a $250 million troubled fund, while top digital asset manager Grayscale has launched an entity to invest in Bitcoin mining hardware with its sister company Foundry to capitalize on the struggling mining sector.

–With help from Jeremy Hill and Rachel Butt.

2023 Bloomberg LP

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