News

BlockFi Failure Due To Neglect Risks Of Intimate Exposure To FTX And Alameda

Key Points:

  • BlockFi’s creditors have accused the platform’s management of ignoring risk warnings to expose FTX and Alameda Research.
  • BlockFi had about $1.2 billion in assets tied to FTX and Alameda when the company declared bankruptcy.
  • Director Zac Prince is said to have dismissed the group’s concerns about lending Alameda $217 million in August 2021.
BlockFi’s demise stemmed from the company leaders ignoring warnings about potential risks associated with FTX and Alameda Research, as revealed in documents filed on July 14.

According to Bloomberg, BlockFi’s creditor committee said in a newly published report that this crypto lender executives ignored their risk management team’s repeated warnings about not granting large loans to Alameda Research.

The report attributed the failure of BlockFi to the fault of CEO Zac Prince and other senior executives. The creditors’ findings were published on Friday.

The commission said that as early as August 2021, the crypto lender had a copy of Alameda’s balance sheet showing that the company relies heavily on FTT, a digital token created by FTX. Alameda’s overreliance on FTT “has raised alarm bells at BlockFi,” but Prince ignored those concerns.

The report quoted Prince as saying in an email that Alameda represents “the biggest/most obvious growth opportunity we have.”

In addition to being accused of ignoring warning signs from FTX, the commission also stated that BlockFi’s business is “fundamentally flawed” as it needs riskier investment partners to turn a profit high for customers.

This means that BlockFi can only do business with a few companies, such as Alameda, that can turn a profit high enough. And just a few days ago, BlockFi released its investigative report, saying that management conducted due diligence before providing loans to FTX.

The failed crypto lender had approximately $1.2 billion in assets tied to FTX and Alameda Research when it filed for bankruptcy in November 2022.

The lending platform directly cited FTX exposure as the reason for filing for bankruptcy. FTX’s FTT token-based mortgage lending has left many companies on the hook after the token price fell from more than $25 to less than $2 amid Chapter 11 filings and reporting issues.

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.

Victor

Recent Posts

FLOKI Announces Dubai Takeover with WAFI Mall Campaign

Miami, Florida, 5th November 2024, Chainwire

16 mins ago

BlockDAG X1 App Receives Huge Response From Community, Hiting Over 200K Users! Latest on Bitcoin & Chainlink Prices

Want to learn about Bitcoin and Chainlink's prices? See why BlockDAG with its X1 app…

37 mins ago

Bitcoin Mining Difficulty Tops 100T Hash for the First Time

New ATH for Bitcoin’s average hashrate, combined with Bitcoin mining difficulty surpassing 100 trillion hashes,…

1 hour ago

US Presidential Election Drives Bitcoin Price Back to $70,000

Bitcoin's price rose 3% to $70,200, influenced by excitement surrounding the US presidential election.

2 hours ago

Xinteria Surpasses $1 Billion in Trading Volume, Unveils Innovative Market-Making Technology

NY, United States of America, 5th November 2024, Chainwire

2 hours ago

Top DePIN Crypto Projects With Huge Airdrop Potential

This Coincu's article presents a curated list of the top DePIN crypto projects with airdrop…

2 hours ago

This website uses cookies.