Report: BlockFi's Risky Investment in FTX and Alameda Despite Knowledge of Infamous Balance Sheet
According to a recently unsealed report made in Friday's court filing, BlockFi Inc. executives ignored repeated warnings from their risk management team regarding significant loans to Sam Bankman-Fried's Alameda Research, collateralized with digital tokens from FTX.
The report, presented by a committee representing BlockFi's unsecured creditors, accuses the cryptocurrency lender of misleading investors, taking shortcuts, and making substantial investments in FTX, despite having access to a secret balance sheet that exposed flaws in Bankman-Fried's empire.
The findings, made public recently, attribute the failure of BlockFi to missteps by CEO Zac Prince and other senior managers.
This revelation comes shortly after BlockFi's investigation, which claimed that Prince and other executives had little reason to be concerned about lending to Alameda before the platform faced allegations of fraud and collapsed.
In a July 14 submission to the United States Bankruptcy Court for the District of New Jersey, the unsecured creditors' committee revealed that BlockFi's risk management team warned about the "high risks" of lending assets to Alameda.
Allegedly, CEO Zac Prince ignored the team's concerns when BlockFi lent Alameda $217 million by August 2021.
The team raised concerns about potential risks if the FTX Token (FTT) used as collateral for the loans had to be liquidated.
After January 2022, the risk management team ceased issuing memos to Prince regarding the potential risks of lending to Alameda, shifting discussions to "offline meetings and Slack."
During these interactions, the CEO occasionally acknowledged the exposure. By the time the firm declared bankruptcy, BlockFi had approximately $1.2 billion in assets tied to FTX and
Read more on cryptonews.com
