Amid The SVB Crisis, Attorney For Blockfi Describes the Crypto Lender As ‘Safe’
A bankruptcy counsel for BlockFi argues that the cryptocurrency lender is secure and in no imminent danger, even though Silicon Bank has been exposed as a potential risk.
Christine Okike, the attorney for the troubled corporation in New Jersey, indicated that the business has adequate finances to maintain normal operations even if it is currently facing legal challenges.
During a court held on Monday for the company’s bankruptcy, Okike of Kirkland & Ellis stated (1) on behalf of BlockFi:
“Everything at BlockFi is running smoothly; we have cash on hand to carry on as usual, which includes paying our staff and suppliers.”
In addition, Okike mentioned that the platform for digital asset-lending anticipated accessing a considerable amount of cash that was kept with Silicon Valley Bank later on that day.
The bankruptcy attorney continued by saying that the majority of BlockFi’s vulnerability comes from the involvement of third-party money-market mutual fund schemes.
This fact gave her assertions that there was no direct effect on BlockFi’s operations additional credence.
According to Reports, BlockFi Is Secure Despite Supposedly $227 Million Exposure to Insolvent Bank
Earlier reports suggested that despite the bank’s reputation for safety, BlockFi could lose substantial money with Silicon Valley Bank.
These data indicate that the lender of digital assets had an unsecured sum of $227 million in a fund held by Silicon Valley Bank. But, on March 10, the bank that was an important requisite to venture-backed networks was closed down.
The California Department of Financial Protection and Innovation failed to explain the closing of Silicon Valley Bank at the time.
According to the reports, the investment BlockFi has made with Silicon Valley Bank is not a deposit protected by the FDIC.
In addition, a document dated March 10 reveals that any federal government agency insurance does not cover the investment in digital assets provided by the lender.
As a direct consequence, Silicon Valley Bank’s share in BlockFi is “not guaranteed by the bank.”
While Silicon Valley Bank provided facilities for investing in various mutual funds, it doesn’t appear that the institution managed any of the funds.
This disclosure also mentioned prominent investing companies as the fund managers, per the website of the bankrupt financial institution situated in Santa Clara.
Among these fund managers is the most prominent asset manager in the world, BlackRock Inc., and the international banking platform Morgan Stanley.
Circle Couldn’t Escape the Banking Collapse
USD Coin (USDC) issuer Circle seems to be directly harmed by the Silicon Valley Bank collapse. Additionally, the P2P payments tech firm appears also to take a hit of Silvergate’s insolvency.
Circle’s last audit report indicated it had $8.6 billion, or nearly 20% of its assets, in multiple American banking institutions.
These included the Bank of New York Mellon, traded on the NYSE under the symbol “BK,” Silicon Valley Bank, and Silvergate Bank (NYSE: SI).
Although the specifics of Circle’s venture with Silicon Valley Bank and Silvergate are not entirely apparent, the business published a statement on Twitter not too long ago that read:
“Circle manages the 25% of USDC reserves that are stored in cash through the assistance of six different banking partners, one of which is Silicon Valley Bank. As we wait for more information on how the FDIC receivership of SVB would impact its depositors, Circle & USDC keeps running normally.”
Recent events have seen USDC fall to $0.87 below the $1 peg.