1 year ago
BlockFi’s downfall was precipitated by its institution leaders neglecting warnings astir imaginable risks tied to FTX and Alameda Research, arsenic revealed successful documents filed connected July 14.
BlockFi made the determination to halt withdrawals connected Nov. 10, 2022, citing the collapse of FTX and Alameda Research arsenic the cause. The institution said it could not run arsenic accustomed owed to a “lack of clarity” astir those firms and aboriginal filed for bankruptcy.
However, the latest filing, which contains the results of a still-ongoing probe from the Official Committee of Unsecured Creditors, suggests that BlockFi’s vulnerability to FTX was not incidental to its failure. Instead, the committee’s findings suggest the company’s illness was the effect of neglect among institution absorption astir the issue.
In 1 conception of the filing, the committee said:
“It whitethorn beryllium existent that Alameda/FTX’s downfall triggered BlockFi’s downfall, but BlockFi’s demise was rooted successful concern practices and decisions good preceding Alameda/FTX’s bankruptcy filing.”
The creditors’ committee specifically alleged that elder BlockFi absorption overruled oregon refused to travel warnings against loaning ample amounts to Alameda Research collateralized by FTX’s FTT token. BlockFi CEO Zac Prince supposedly told BlockFi squad members to “get comfortable” with this usage of funds.
More broadly, the latest filing described BlockFi’s activities arsenic a “flawed concern model,” noting that the institution took connected “unreasonable” risks that led to “cataclysmic loss.” The filing challenged earlier claims that BlockFi debtors are successful a amended presumption than FTX debtors. It besides noted that BlockFi was not a regulated lending instauration contempt the information that it presented itself arsenic akin to regulated and insured tiny banks.
BlockFi bankruptcy proceedings continue
Bankruptcy proceedings successful January 2023 revealed that BlockFi had vulnerability to some FTX and Alameda Research amounting to $1.2 billion, an magnitude that was larger than the institution had antecedently reported.
FTX and different companies besides expressed opposition to BlockFi’s bankruptcy plans successful tribunal filings successful July, perchance delaying the institution from acting connected that plan.
BlockFi remains successful bankruptcy proceedings. Early filings suggested that the institution owes betwixt $1 cardinal and $10 cardinal to implicit 100,000 creditors.
The station BlockFi CEO neglected warnings astir FTX anterior to collapse, tribunal docs say appeared archetypal connected CryptoSlate.
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