The Second Week of Sam Bankman-Fried’s Fraud Trial: Witness Testimony Reveals BlockFi’s Involvement
The second week of Sam Bankman-Fried’s criminal trial for fraud came to an end with testimony from Zac Prince, CEO of crypto lending firm BlockFi. Prince revealed that BlockFi had loaned $1.1 billion to Alameda, Bankman-Fried’s trading firm, before FTX’s collapse. Testimonies from former employees and members of Bankman-Fried’s inner circle indicated that he was responsible for the decisions that led to Alameda’s $65 billion “credit line” on FTX and $100 million in Chinese bribes.
Prince also shared that Bankman-Fried had discussed plans to start a new company while admitting FTX and Alameda’s fraudulent activities to nearly 30 team members. One employee recorded the conversation and submitted it as evidence to federal prosecutors.
Alameda and 3AC Loans Lead to BlockFi’s Collapse
Prince testified that BlockFi provided loans to Alameda, with the initial amount being $50 million. Over the course of a year, BlockFi issued over $1 billion in open-term loans to Bankman-Fried’s hedge fund. However, when Terra’s ecosystem collapsed, defaulting on loans, Three Arrows Capital (3AC) incurred heavy losses and recalled $650 million in loans given to Alameda. Additionally, BlockFi had $350 million stuck on FTX due to withdrawal restrictions.
Prince mentioned that Alameda had provided shares in Robin Hood and Grayscale’s Bitcoin Trust (GBTC) as collateral for the loans.
Other Lenders Involved and Failed FTX-BlockFi Merger
Caroline Ellison testified that Alameda borrowed hundreds of millions from lenders such as Celsius, Genesis, and Voyager. These loans were repaid using user assets deposited on FTX. Regarding the failed merger between FTX and BlockFi, Prince explained that the terms included a future acquisition and an extended credit line.
We decided if we could bring additional capital in to help with consumer confidence, it would be good. FTX proposed a deal, that had two parts – a $400 million credit facility and for FTX to acquire BlockFi in July 2023. But it never happened.
Zac Prince, BlockFi CEO
BlockFi’s Prince Reflects on Disclosure and Trial Proceedings
In hindsight, Prince expressed his belief that Alameda would not have received loans if the risks associated with FTT and FTX’s treatment of customer assets had been made public. The trial adjourned until October 16, with three more witnesses set to testify, including FTX’s former director of engineering.
Hot Take: Sam Bankman-Fried’s Trial Uncovers BlockFi’s Role in Alameda’s Collapse
The ongoing trial of Sam Bankman-Fried has shed light on the involvement of crypto lending firm BlockFi in the collapse of Bankman-Fried’s trading firm, Alameda. Witness testimony from BlockFi CEO Zac Prince revealed that the company had loaned $1.1 billion to Alameda before FTX’s downfall. The trial has also revealed allegations of fraud, including a $65 billion “credit line” on FTX and Chinese bribes. The testimony highlights the risks associated with undisclosed information and the impact it can have on lenders like BlockFi. As the trial continues, more witnesses are expected to provide insights into the events leading up to Alameda’s collapse.
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