TechFlow reported, according to Coindesk, that BlockFi creditors believe BlockFi's claim of being a victim of FTX and Alameda is a "false narrative," attributing the company's collapse to poor management decisions and the restructuring agent.
The BlockFi creditor committee pointed out that in the days following FTX's collapse, as the cryptocurrency market plummeted, BlockFi converted approximately $240 million worth of cryptocurrencies into fiat currency, causing significant financial losses and potential tax issues for clients. BlockFi subsequently deposited the proceeds along with an additional $10 million into Silicon Valley Bank (SVB), which later failed.
The BlockFi creditor committee stated that SVB’s deposit facility did not meet the protection requirements under the Bankruptcy Code, prompting the U.S. Trustee to object to holding estate funds there. A final arrangement was reached requiring SVB to provide sufficient collateral (in the form of bonds) in case of bank failure. However, no one at BlockFi—including the restructuring team—bothered to follow up, and no party paid any margin. Additionally, BlockFi spent $22.5 million of client funds to purchase $30 million in insurance coverage for its directors and executives.
