As if things with FTX couldn’t get any more heated, now BlockFi is being forced to talk about their longstanding relationship with FTX long before the crash happened. And how $1.2 billion suddenly appeared in the BlockFi coffers, just when they needed it most… Thanks to a certain former billionaire we all know as Sam Bankman-Fried.
The BlockFi papers stem back to 2022, when the Celsius crash led to a cascading effect on the rest of the crypto industry. One of those falling dominos was BlockFi. It was during these torments that SBF came in on his white horse and shining armor to save the day.
The unredacted financial records show that BlockFi had $415.9 million worth of assets linked to FTX and $831.3 million in loans to Alameda as of January 14th, 2023. Both FTX and Alameda were also included in FTX’s bankruptcy in November, which harmed the crypto markets.
Earlier, lawyers for BlockFi had said that the loan to Alameda was valued at $671 million, and an additional $355 million in digital assets were frozen on the FTX platform.
Does the Price of Bitcoin and Ether Affect BlockFi?
However, the value of these holdings has since risen as Bitcoin and Ether prices have rallied. M3 Partners, an advisor to the creditor committee, prepared these financial records. The firm is represented by the law firm Brown Rudnick and is made up of BlockFi clients who are owed money by the bankrupt lender.
Let’s back up a bit and explain who BlockFi is and how they ended up in bed with one of the now most notorious firms in financial history.
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.
Other Financial Details of BlockFi
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 its second-largest creditor. This was due to FTX’s bailout of BlockFi in July 2022. This involved FTX providing the lender with a $400 million credit facility. They also got the option to buy the company for up to $240 million.
M3 Partners is an advisor to the creditor committee. It admitted the filing was uploaded in error. 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. This gave all stakeholders key metrics and context about the bankruptcy proceedings.
The privately held firm, founded in 2017 by Zac Prince and Flori Marquez, filed for Chapter 11 bankruptcy protection. This was two weeks after halting withdrawals of customer deposits due to significant exposure to the 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. Its liabilities are in the range of $1 billion to $10 billion.
The company has $257 million in cash on hand. It claims this will provide sufficient liquidity to support operations during the restructuring process.
Will Customers Recoup Some Losses?
Well, in short, no, and yes. As litigators have pointed out before, these types of cases tend to be drawn out for several years. It’ll ultimately cost not only the taxpayer a significant amount but the plaintiffs as well.
And so the real question is not whether customers will receive their funds back but whether or not there are any funds to be received by the time everything is said, done, and completely paid for. One thing is for certain, BlockFi and FTX will have a lot of explaining to do for years to come.
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