Zach Prince — the former CEO of collapsed cryptocurrency lending company BlockFi — took the stand during the trial of Sam Bankman Fried in New York City on Friday.
The CEO discussed the size of his loans to the exchange’s sister trading desk, Alameda Research, and what exactly he knows about the state of their balance sheet as one of its major creditors.
How did BlockFi go bankrupt?
For each certificate Sum it up By Inner City Press BlockFi provided “$5 to $10 billion” overall, with $50 million of that initially going to Alameda, Prince said. Between May 2021 and May 2022, this amount increased from $50 million to $1.1 billion, he said.
Then, disaster struck: LUNA’s ecosystem collapsed, Three Arrows Capital defaulted on its obligations, and rivals Celsius and Voyager froze their platforms. This led to BlockFi arranging a $400 million credit facility with FTX at the time, as well as making arrangements for a potential buyout of the exchange.
Despite its troubles, BlockFi made another $850 million loan to Alameda between July 2022 and November 2022, shortly after the company repaid its initial loan to BlockFi on call. Prince said they had previously seen a copy of Alameda’s balance sheet that included details of their loans from “other lenders,” but his company did not realize it had obtained loans from FTX.
“They would have been insolvent,” he said, noting that he would not have loaned money to the company if they had known such loans existed, nor if they had known that Alameda was using FTX customers’ money.
Loans to Sam Bankman Fried would also have worried BlockFi, he said. When the price of FTT fell in November, BlockFi tried to withdraw its loan again, but only recovered part of its funds.
BlockFi also has another $350 million sitting directly on the FTX exchange. In the end, Prince blamed the two companies for causing his company’s bankruptcy.
Was BlockFi CEO really innocent?
During her examination, former Alameda president Carolyn Ellison admitted that she lied about her company’s financial status to other major creditors, such as Genesis.
However, BlockFi’s creditors claimed that Zach Prince was aware of Alameda’s disastrous balance sheet early in 2021, which consisted mostly of illiquid FTT tokens. Many of the loans made to Alameda were collateralized with the aforementioned token.
“Prince dismissed those concerns, urging the risk team to learn to ‘feel comfortable.’ [with Alameda] “We are a three-share size borrower, only with FTT and other types of collateral rather than GBTC shares,” BlockFi’s committee of unsecured creditors wrote in May. Prosecute.
During his court testimony, Prince claimed that BlockFi’s loans after July 2022 were collateralized by shares of Grayscale’s Bitcoin Trust (GBTC) and Robinhood.
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