BlockFi Management Ignored Warnings and Lent Millions to Alameda Research, Bankruptcy Filing Alleges
According to bankruptcy court filings, senior management at BlockFi ignored repeated warnings from their risk management team about lending to Alameda Research, a sister company of the bankrupt FTX. Despite the warnings, BlockFi lent $217 million to Alameda by August 2021. The risk advisers had specifically warned about the risks if FTX tokens used as collateral had to be sold off. The filing alleges that BlockFi’s management team dismissed the concerns and encouraged the loan to Alameda.
Main breakdown of key points:
- BlockFi senior management ignored warnings about lending to Alameda Research
- $217 million was lent to Alameda by August 2021
- Risk advisers warned about risks if FTX tokens used as collateral had to be sold off
- BlockFi’s management team dismissed concerns and encouraged the loan
- CEO Zac Prince stopped receiving written memos about risks from the risk management team
Despite taking back the loans from Alameda in June 2022, BlockFi provided another round of lending to Alameda, extending nearly $900 million in loans between July and September 2022. The report states that BlockFi’s own business practices and decisions contributed to its downfall. BlockFi has disputed the report and disagreed with its findings. The company owes creditors between $1 billion and $10 billion.
Hot Take:
The alleged mismanagement and disregard for risk warnings by BlockFi’s senior management raise serious concerns about the company’s decision-making process. The bankruptcy filing and the subsequent negative sentiment towards the crypto industry are further reminders of the risks and challenges associated with the industry.
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