BlockFi Stuck $227 Million At Silicon Valley Bank
- BlockFi has allocated $227 million in uninsured assets to a money market mutual fund launched by struggling Silicon Valley Bank.
- The corporation disregarded earlier this month’s warnings about the risks of an uninsured account.
- The investment of BlockFi is not covered by any federal government agency and is not guaranteed by the bank.
BlockFi, the bankrupt crypto lender, runs the possibility of having its cash frozen at Silicon Valley Bank, which failed Friday after a run on deposits stymied the bank’s efforts to acquire new capital.
According to a March 10 notification from banking authorities, Silicon Valley Bank, a subsidiary of SVB Financial Group, has been closed.
The California Department of Financial Protection and Innovation shuttered SVB today, according to the Federal Deposit Insurance Corporation (FDIC).
BlockFi is one of the clients whose accounts are not protected by Silicon Valley Bank’s FDIC, according to a bankruptcy filing filed on March 10. The FDIC said that withdrawals would be limited to insured accounts worth no more than $250,000 starting next Monday.
The U.S. Trustee, a section of the Justice Department in charge of reviewing bank failures, said in a court filing Friday that BlockFi had about $227 million in uninsured cash at the bank.
According to the filing, SVB’s balance summary statement notes that BlockFi’s investment is not an FDIC-insured account, is not protected by any federal government agency, and is not guaranteed by the bank.
The government watchdog claimed BlockFi disregarded warnings about the risks of uninsured accounts earlier this month. The watchdog said that it asked BlockFi to prove that it had made efforts to secure the funds stored in the bank’s unprotected money-market mutual fund (MMMF).
The decision adds to the current Silvergate bankruptcy chaos, which has seen crypto prices plummet after the crypto-friendly bank’s financial troubles were revealed in early March.
Circle, the USDC issuer, is likewise affected by the failures of SVB and Silvergate. Because of this consequence, the USDC has been severely depegged.
The precise amount held up at SVB and Silvergate is unknown; nonetheless, Circle released a statement stating that the business and USDC would continue to function regularly until the FDIC receivership of SVB is resolved.
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