BlockFills, the Chicago-based cryptocurrency options and lending platform backed by Susquehanna, is preparing for a corporate restructuring after suffering significant financial losses and a customer lawsuit alleging misuse of funds.
According to a report in the Financial Times, the company has engaged consulting group BRG and law firm Katten Muchin Rosenman to advise on its restructuring efforts.
BlockFills stopped withdrawing customers last month after bad debt and bad bets linked to crypto mining operations. The company has since disclosed to potential investors that its financial statements contained errors.
A Manhattan federal judge on Thursday issued a temporary restraining order against BlockFills after Dominion Capital filed a lawsuit alleging the company mishandled customer funds.
Dominion claims the company pooled customer assets and failed to separate the funds from the customer. According to court filings, BlockFills executives acknowledged that customers’ assets are held on a single balance sheet rather than in separate wallets.
The lawsuit also alleges that the company’s executives used the funds to cover operating expenses, crypto mining losses and unsecured debts.
BlockFills said it is actively exploring options to stabilize the company.
The company has appointed BRG executive Mark Renzi as chief transformation officer as it works on a restructuring plan that could inject new capital and tighten financial controls.
BlockFills told potential investors that its financial problems stemmed from losses in trading, lending and crypto mining, as well as poor accounting. The company reported a balance sheet deficit of about $80 million.
BlockFills also reported losses of about $23 million related to loans to Babel Finance and Aexa Digital Finance, both of which have since filed for bankruptcy. The company also owes money from the bankruptcy of FTX, while it owes money to the bankruptcy estate of Celsius.
The company lost nearly $30 million from its crypto mining venture before shutting down the business.
Founded in 2018, BlockFills is expected to process approximately $60 billion in trading volume by 2025, including $20 billion in spot trading and approximately $40 billion in derivatives.
