Bankrupt crypto lender Blockfi has $227 million in uninsured funds stuck in an account maintained by failed lender Silicon Valley Bank.
as of March 10 Admission BlockFi has $227 million parked in a money market mutual fund not insured by the Federal Deposit Insurance Corporation (FDIC) at the now-collapsed Silicon Valley bank, according to the Justice Department.
The Justice Department said documents from Silicon Valley Bank show that the BlockFi account is not considered a deposit, is not insured by the FDIC, and thus may be of little value. The federal watchdog claimed that BlockFi ignored warnings from earlier this month about the dangers of uninsured accounts.
The disclosure comes on the same day that federal regulators seized the bank following a surprise collapse. The Silicon Valley bank has been one of the largest providers of financial services to tech startups, including crypto companies.
Meanwhile, insured depositors are expected to get access to their funds by Monday morning. Depositors with amounts in excess of the insurance cap will receive receivership certificates for their uninsured balances, meaning businesses with large deposits in the bank are unlikely to be able to withdraw their money anytime soon.
Some in the crypto community have noted that despite SVB’s troubles, BlockFi’s funds may not be directly at risk. Some crypto Twitter users argued that the value of BlockFi shares will depend on what happens in money market funds (MMFs), not what happens with the Silicon Valley bank.
Twitter user @mattwwaters said, “Is this a regular MMF, not affiliated with SVB, custodian over SVB or its securities affiliate? Shouldn’t affect SVB receivership.” “The MMF is not FDIC insured, but the value of the shares will depend on what happens to the SVB, depending on what is in the MMF.”
More crypto companies had exposure to SVB
Apart from BlockFi, several other crypto companies have also disclosed their exposure to the bank. For one, Circle, the issuer of USDC, the world’s second-largest stablecoin, has revealed that it placed an undisclosed portion of its $9.8 billion cash reserves in a failed Silicon Valley bank.
The company said in a statement on Friday that SVB is one of six banks trusted to manage USDC’s cash reserves, but claims USDC will be able to continue to operate normally. Nevertheless, the stablecoin has pulled away from its target peg of $1 amid a wave of withdrawals.
In addition, crypto-focused venture capital firm Pantera may also have an unknown amount of exposure to the collapse of SVB. As recently as last month, the firm counted the failed bank among just three custodians of its private funds, according to a February 3 SEC filing. Admission,
Avalanche Foundation, which backs Avalanche Blockchain, Era Labs, the entity behind the Bored App Yacht Club NFT project, and a few other blue-chip collections, as well as Web3 company Proof are some of the other crypto companies that have recently been involved in Silicon Valley’s collapse. badly affected by Valley Bank.
blockfi became the first company To file for bankruptcy after the collapse of FTX. The crypto lender has over 100,000 creditors and owes between $1 billion to $10 billion to those creditors.
