January 30, 2023

Crypto lender BlockFi’s exposure to the spectacular collapse of Sam Bankman-Fried’s empire was greater than previous reports suggested.

BlockFi

BlockFi had over $1.2 billion in assets linked to the FTX exchange and its trading arm, Alameda Research, according to unedited filings erroneously uploaded with no redactions.

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. This compares to previous disclosures that showed $355 million was frozen on the FTX platform while the $671 million loaned to Alameda was trapped there. Bitcoin and Ether have since rallied, increasing the value of these holdings.

On the other hand, BlockFi listed an outstanding $275 million loan to FTX.US, citing the American arm of FTX’s now-bankrupt exchange as its second-largest creditor. This was due to FTX’s July 2022 bailout of BlockFi, in which FTX provided the lender with a $400 million credit facility and an option to purchase the company for up to $240 million.

M3 Partners, an adviser to the creditors’ committee, admitted the filing was uploaded in error and said the financial data was leaked as part of a presentation he put together.

The filings contain information about certain payments made to insiders and other parties ahead of the bankruptcy filing in November. The Jersey City-based company also submitted a presentation providing key metrics and context to the bankruptcy process for all stakeholders.

Similar to many clients, BlockFi claims that its management team has deployed its personal wealth on the platform to trade, earn interest and store various cryptocurrencies under the same terms of service. For comparison, in 2022, BlockFi completed a total of $7.7 billion in retail withdrawals, and its management team’s withdrawals account for 0.15% of that total.

The privately held company, founded by Zac Prince and Flori Marquez in 2017, filed for Chapter 11 bankruptcy protection nearly two weeks after halting withdrawals from customer deposits due to significant exposure to bankrupt exchange FTX.

Approximately eight other related companies are involved in the litigation, including the Bermuda subsidiary. In the 23-page bankruptcy filing, BlockFi says it has more than 100,000 creditors with liabilities ranging from $1 billion to $10 billion. The company has cash on hand of $257 million which it says will provide sufficient liquidity to support operations during the restructuring process.

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