Court Documents Reveal BlockFi CEO’s Ignored Warnings About Exposure to FTX and Alameda
– Zac Prince, CEO of bankrupt crypto lending firm BlockFi, ignored warnings from the company’s risk management team regarding exposure to FTX and Alameda Research.
– By the time of its bankruptcy filing, BlockFi had $1.2 billion in assets tied to FTX and Alameda.
– The risk management team had flagged concerns about lending to Alameda Research and the risks associated with the FTT token used for collateral, but these warnings were ignored.
– In January 2022, the risk management team stopped issuing warnings, and discussions moved to Slack where the CEO occasionally acknowledged BlockFi’s exposure.
– BlockFi filed for bankruptcy citing the collapse of FTX and Alameda Research, but the filing suggests that poor decision-making and bad business practices were the ultimate reason behind the bankruptcy.
BlockFi’s Bad Business Practices Led to Bankruptcy
– BlockFi had significant exposure to FTX and its associated entities, including a $400 million credit line to FTX US.
– Despite recalling loans from Alameda in June 2022, BlockFi re-lent nearly $900 million to them between July and September 2022, primarily collateralized by FTT.
– The filing describes BlockFi’s functioning as a “flawed business model” and states that the company took unnecessary and unreasonable risks.
– BlockFi’s bankruptcy was rooted in its own business practices and decisions, preceding the downfall of Alameda and FTX.
– The filing challenges claims that BlockFi debtors are in a better position compared to FTX debtors and questions BlockFi’s status as a regulated lending institution.
BlockFi Disagrees with Report, Blames FTX and Alameda
– BlockFi disagrees with the filing, claiming it cherry-picked statements and lacks objective analysis.
– BlockFi blames direct exposure to FTX and Alameda as the reason for its bankruptcy and calls them fraudulent enterprises.
– FTX and other companies have opposed BlockFi’s bankruptcy plans in court filings, causing delays.
– BlockFi currently owes between $1 billion to $10 billion to creditors.
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