According to bankruptcy court filings, BlockFi senior management disregarded numerous warnings from its risk management staff regarding lending to Alameda Research, a sibling business of the insolvent FTX.According to the document, despite the cautions, it continued to lend $217 million to Alameda by August 2021.The report, which was put together by a committee that represents BlockFi’s unsecured creditors, further states that the risk advisors had particularly cautioned about the hazards if FTX coins used as collateral had to be auctioned off.
BlockFi’s senior management staunchly refused and overruled “repeated warnings by the Company’s credit risk department not to loan enormous sums to Alameda, collateralized by FTT,“ it states.
Alameda’s management team was alerted that Alameda had a sizeable number of unlocked FTT tokens on its balance sheet as early as August 2021, according to the filing, which caused concerns within the business.However, according to the charges, BlockFi downplayed the worries and urged the team to go ahead with the loan to Alameda.
The risk management team ceased sending CEO Zac Prince formal memos about the risks starting in January 2022 and started holding offline meetings and using Slack for discussions, according to the paper.The CEO occasionally acknowledged the possible risks in these chats, it continues.BlockFi’s bankruptcy petition later revealed that the company was linked to FTX and Alameda for almost $1.2 billion.
BlockFi provided a sizeable $400 million credit line to FTX US in July 2022, further solidifying their partnership financially amid the so-called “crypto winter.”The data indicate that in June 2022, the corporation took back its loans from Alameda, and that Alameda swiftly paid off a sizeable chunk of the outstanding debt.According to the article, however, BlockFi continued its lending to Alameda rather than canceling the partnership.According to the petition, BlockFi provided Alameda with loans totaling almost $900 million between July and September 2022. As collateral for these loans, FTT tokens were mostly used.
According to the research, BlockFi’s failure was primarily due to the company’s own business practices and choices made before Alameda/FTX filed for bankruptcy.BlockFi disagreed with the report’s conclusions and contested them in response to the filing.It alleged that the study made mistakes on other issues, cherry-picked statements out of context, and did not offer the promised objective analysis.The amount the business owes creditors is estimated to be between $1 billion and $10 billion.With Zero Shorts tweeting in June that there is “nothing legit in crypto,” the announcement of the company’s bankruptcy proceedings has added to the unfavorable opinion toward the cryptocurrency business.