Bankrupt crypto lender BlockFi has $227 million in uninsured funds stuck in an account held by failed lender Silicon Valley Bank.
According to statement According to the Justice Department on March 10, BlockFi is holding $227 million in a non-FDIC-insured money market mutual fund at now-defunct Silicon Valley Bank.
The Justice Department said filings from Silicon Valley Bank show that the BlockFi account is not considered a deposit, not insured by the FDIC, and therefore could lose value. The federal watchdog said BlockFi ignored warnings earlier this month about the dangers of an uninsured account.
This came on the same day that federal regulators seized the bank after its stunning collapse. 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 have access to their funds by Monday morning. Depositors whose funds exceed insurance limits will receive a receivership certificate for their uninsured balances, meaning companies with large deposits stuck in the bank are unlikely to get their money out anytime soon.
Some in the crypto community have pointed out that BlockFi funds may not be directly at risk despite SVB’s problems. Some crypto Twitter users have argued that BlockFi’s share price will depend on what happens to money market funds (MMFs) rather than what happens to Silicon Valley Bank.
Is it an ordinary non-SVB money fund held by SVB or its securities affiliate? The competitive management of SVB should not affect this,” said Twitter user @mattwwaters. “FMF is not insured by the FDIC, but the value of the shares will depend on what FFM has, not what happens to SVB.”
More cryptocurrency companies had exposure to SVB
In addition to BlockFi, numerous other crypto companies have also disclosed their risks to the bank. First, Circle, the issuer of the second-largest USDC stablecoin, revealed that it is keeping an undisclosed portion of its $9.8 billion in cash reserves at the failed Silicon Valley Bank.
In a statement on Friday, the company said SVB was one of six banks it relied on to manage the USDC’s cash reserves, but said the USDC would be able to continue operating as normal. Still, the stablecoin pulled away from its $1 peg amid a wave of withdrawals.
Additionally, crypto-focused venture capital firm Pantera may also have an unknown level of exposure to SVB’s collapse. As recently as last month, the firm listed the failed bank as one of only three custodians of its private funds, according to an SEC filing dated 3 February .
The Avalanche Foundation, which backs the Avalanche blockchain, Yuga Labs, the organization behind the Bored Ape Yacht Club NFT project and some other blue chip collections, and Web3 Proof are some of the other crypto companies that have been hit hard by the recent Silicon Bank crash the valley
BlockFi became the first company to file for bankruptcy after the FTX collapse. The crypto lender has more than 100,000 creditors and owes between $1 billion and $10 billion to those creditors.
