BlockFi’s Loan To 3AC Was $1 Billion, Morgan Creek Digital Says

BlockFi’s Loan To 3AC Was $1 Billion

According to Morgan Creek Digital, BlockFi lent 3AC $1 billion, with 2/3 of the loan’s security being bitcoin and 1/3 being GBTC.

On June 16, BlockFi CEO Zac Prince acknowledged via Twitter that the company had liquidated a loan from a significant client that had been overcollateralized and that it has hedged all associated collateral. Three Arrows Capital received this loan, according to reports from the Financial Times, however Mark Yusko stated during the call that the loan was for $1 billion.

During the call, Yusko asserted that 3AC had provided around $1.33 billion in assets, which amounted to a 30% overcollateralization of the $1 billion loan. Later, co-founder Anthony Pompliano of Morgan Creek said that two-thirds of that sum were bitcoin, which was promptly confiscated and liquidated, and the last third was made up of shares of GBTC. That would be valued at around $430 million.

“All of this has been reported from them to us,” Pompliano said, referring to BlockFi.

A cryptocurrency investment product called GBTC, or Grayscale Bitcoin Trust, enables investors to buy shares in a trust account that is holding a significant amount of bitcoin. Since the trust simplifies taxation, reporting, and trading like a regular financial product, some investors choose to purchase it over buying bitcoin on the open market.

Shares of GBTC often trade for a discount known as the “Grayscale discount,” which, since 2021, has varied between 6% and 38%, despite the fact that the product is intended to be pegged to the market value of Bitcoin.

According to the call, BlockFi had no trouble selling its Bitcoin positions, but it had trouble selling its GBTC positions since the discount had dropped to lows of around 34% last week. The price dropped when BlockFi tried to sell its GBTC holdings, Pompliano said.

FTX and Morgan Creek representatives declined to comment on the specifics of the collateral. It would be irresponsible to indicate that any claims made outside of official BlockFi or FTX channels are anything other than pure conjecture, according to a BlockFi spokeswoman who claimed that the company “does not comment on market rumors.”

DISCLAIMER: The Information on this website is provided as general market commentary and does not constitute investment advice. We encourage you to do your own research before investing.

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