BlockFi’s downfall was caused by the company’s leaders ignoring warnings about potential risks associated with FTX and Alameda Research, according to documents filed in the US. July 14th.
BlockFi decided to suspend withdrawals on November 10, 2022 due to the bankruptcy of FTX and Alameda Research. The company said the “uncertainty” surrounding these companies prevented them from operating as normal and later filed for bankruptcy.
However, the latest filing includes the results of an ongoing investigation by the Official Unsecured Creditors Committee, suggesting BlockFi’s exposure to FTX was not incidental to that failure. there is Rather, the Commission’s findings suggest that the company’s bankruptcy is the result of company management’s negligence on this issue.
In a section of the filing, the Commission states:
“It may be true that the fall of Alameda/FTX caused the fall of BlockFi, but BlockFi’s demise was rooted in business practices and decisions that predate Alameda/FTX’s bankruptcy filing.”
The creditors panel, among other things, alleges that BlockFi’s senior management dismissed or refused to comply with warnings about a large loan to Alameda Research backed by FTX’s FTT tokens. BlockFi CEO Zac Prince allegedly told BlockFi team members to “get used to” how the funds will be used.
More broadly, the latest filing described BlockFi’s activities as a “flawed business model,” noting that the company took “unreasonable” risks leading to “massive losses.” The application challenged previous claims that BlockFi debtors are in a better position than FTX debtors. He also pointed out that BlockFi is not a regulated lending institution, even though it claims to be similar to a regulated and insured small bank.
BlockFi Bankruptcy Proceedings Continue
Bankruptcy proceedings in January 2023 revealed that BlockFi had $1.2 billion worth of exposure to both FTX and Alameda Research, which is higher than the company had previously reported. It was big.
Companies such as FTX also opposed BlockFi’s bankruptcy plans in July’s court filings, which could delay action on the company’s plans.
BlockFi is still in bankruptcy proceedings. The company owes between $1 billion and $10 billion to more than 100,000 creditors, according to early filings.
Post-BlockFi CEO ignored warnings about FTX before collapse, first appearing on CryptoSlate, court documents say.