The move by BlockFi demonstrates how the weakening and subsequent liquidation of crypto hedge fund Three Arrows Capital continues to reverberate throughout the industry.
The company has no positions in GBTC and is winding down “a couple” of loans with GBTC as collateral, the Jersey City, New Jersey-based lender said in a statement following the Bloomberg story’s publication.
The company said:
“We are not saying that we won’t support GBTC as collateral moving forward. Like any collateral, we constantly evaluate appropriate collateral haircut ratios and aim to accept as many types of collateral that our clients hold as possible.”
Grayscale was exposed to the collapse of Three Arrows, which owned more than 5% of the Grayscale Bitcoin Trust at one point. BlockFi has already suffered approximately $80 million in losses from Three Arrows’ bad debt, which were absorbed by the company and will be part of the disgraced hedge fund’s ongoing bankruptcy case, according to BlockFi Chief Executive Officer Zac Prince.
BlockFi and FTX US agreed at the end of June to provide the crypto lender with a $400 million revolving credit facility and the option for FTX US to acquire BlockFi for up to $240 million. Unlike other cryptocurrency lenders such as Celsius, Babel Finance, and Voyager Digital, BlockFi has been able to keep operations running and has not had to suspend withdrawals.
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