Zac Prince, the former CEO of BlockFi, appeared in court during the trial of Sam Bankman-Fried. He discussed the loans that BlockFi had provided to Alameda Research, a sister trading desk of the exchange, and what he knew about their balance sheet as a major creditor. According to Prince’s testimony, BlockFi lent out a total of “five to ten billion dollars,” with $50 million initially going to Alameda. This amount increased to $1.1 billion between May 2021 and May 2022.
However, disaster struck when the LUNA ecosystem collapsed and Three Arrows Capital defaulted on its payments to BlockFi. This led to other firms like Celsius and Voyager freezing their platforms. To cope with these challenges, BlockFi secured a $400 million credit facility with FTX and explored the possibility of a full buyout from the exchange.
Despite these difficulties, BlockFi extended another $850 million loan to Alameda between July 2022 and November 2022. Prince admitted that they had seen a version of Alameda’s balance sheet prior to this, but they were unaware of loans from FTX and the use of customer funds by Alameda. Prince stated that if they had known about these loans and practices, they would not have lent money to Alameda.
BlockFi also has $350 million directly on FTX’s exchange. Ultimately, Prince blamed both FTX and Alameda for causing BlockFi’s bankruptcy.
During the trial, it was revealed that ex-Alameda chief Caroline Ellison had lied about her company’s financial status to other creditors. However, BlockFi’s creditors have alleged that Zac Prince knew about Alameda’s troubled balance sheet as early as 2021, which mainly consisted of illiquid FTT tokens. Many loans provided to Alameda were collateralized by these tokens.
In response, BlockFi’s Committee of Unsecured Creditors claimed that Prince dismissed the concerns and urged the risk team to accept Alameda as a borrower similar in size to Three Arrows but with different collateral types. Prince stated during his testimony that BlockFi’s loans after July 2022 were collateralized by shares of Grayscale’s Bitcoin Trust (GBTC) and Robinhood.
Overall, the trial shed light on the loans between BlockFi and Alameda, as well as the allegations surrounding Zac Prince’s knowledge of Alameda’s financial situation.
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