Failed crypto lending platform BlockFi trying to re-establish its services by getting its reserved funds back from Silvergate Bank.
BlockFi was a popular crypto lending platform but in Nov 2022 this company failed because this company had significant financial exposure to the FTX crypto exchange. In early Nov 2022, FTX failed & filed for bankruptcy in a US district court. Later on 28 Nov 2022, BlockFi filed for bankruptcy under the chapter 11 code.
Recently BlockFi bankruptcy team published a document on the website of BlockFi’s restructuring advisor. BlockFi bankruptcy team confirmed that they are doing their best to restructure the platform and for some plans, they ordered Silvergate Bank to immediately release $9.85 million.
Since Aug 2020, Silvergate Bank was a BlockFi’ banking partner which was helping the BlockFi team to accept/transfer fiat funds on behalf of customers.
In Q4 2021, Silvergate & BlockFi reached an agreement where BlockFi agreed to hold $10 million in the Silvergate Bank as reserve funds. Now, BlockFi wants all those funds back.
“Silvergate shall immediately release $9,850,000 from the Silvergate Reserve Account to an account designated by the Debtors,” the order said while permitting Silvergate to hold the remaining $150,000 in the reserve account.”
It is worth it to note that Silvergate Bank is not in a healthy financial position. Just a couple of days ago, Silvergate announced that it will take additional two weeks to file the company’s 2022 financial report, 10-k filing. Through the announcement, Silvergate confirmed that Bank will publish its 10-K report with a significant loss, as many of its crypto partners faced significant losses in 2022. So far, 8 crypto companies distanced their business from Silvergate Bank and now there are huge chances that Silvergate may fail to release funds to BlockFi.