Bitcoin rally inflates BlockFi’s exposure to FTX

abdelaziz Fathi

Crypto lender BlockFi’s exposure to the spectacular collapse of Sam Bankman-Fried’s empire was greater than prior reports suggested.

BlockFi

According to unredacted filings that were mistakenly uploaded without redactions, BlockFi had over $1.2 billion in assets tied up with FTX exchange and its trading arm Alameda Research.

The New Jersey-based lender, which filed for Chapter 11 bankruptcy protection in late November, had $415.9 million in digital assets linked to FTX and $831.3 million in loans to Alameda. That compares to previous disclosures that showed $355 million frozen on the FTX platform, while the $671 million loaned to Alameda became trapped there. Bitcoin and ether have since rallied, lifting the value of those holdings.

On the other hand, BlockFi listed an outstanding $275 million loan to FTX.US and called the American arm of FTX’s now-bankrupt exchange as its second-largest creditor. This was due to FTX’s bailout of BlockFi in July 2022, which involved FTX providing the lender with a $400 million credit facility and the option to buy the company for up to $240 million.

M3 Partners, an advisor to the creditor committee, admitted the filing was uploaded in error and said the financials were leaked as part of a presentation it assembled.

The filings contain information on certain payments made to insiders and other parties prior to the bankruptcy filing in November. The Jersey City-based firm also filed a presentation that provides all stakeholders with key metrics and context about the bankruptcy proceedings.

Similar to many clients, BlockFi claims that its management team deployed their personal assets on the platform, to trade, earn interest, and store different cryptocurrencies under the same terms of service. For context, in 2022, BlockFi completed a total of $7.7 billion in retail withdrawals, and the management team’s withdrawals represent 0.15% of that total volume.

The privately held firm, founded in 2017 by Zac Prince and Flori Marquez, filed for Chapter 11 bankruptcy protection nearly two weeks after halting withdrawals of customer deposits due to significant exposure to bankrupt exchange FTX.

Approximately eight additional affiliated companies are part of the proceedings, including its Bermuda subsidiary. In the 23-page bankruptcy filing, BlockFi indicates it has more than 100,000 creditors, with liabilities in the range of $1 billion to $10 billion. The company has $257 million in cash on hand, which it says will provide sufficient liquidity to support operations during the restructuring process.

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