Christine Okike said BlockFi remains safe and looked to access significant cash held with Silicon Valley Bank yesterday.
Despite the Silicon Bank exposure, a BlockFi bankruptcy lawyer maintains that the digital asset lender is safe and in no immediate danger. The lawyer, Christine Okike, stated that the embattled New Jersey-based company also has sufficient funds to continue normal operations.
As Okike of Kirkland & Ellis said on behalf of BlockFi at a Monday bankruptcy hearing:
“BlockFi is fine; we have access to cash to operate in the normal course, including paying employees and vendors.”
Furthermore, Okike also noted that the digital asset-lending platform expected to access substantial cash held with Silicon Valley Bank later that day. The bankruptcy lawyer added that most of BlockFi’s exposure is via third-party money-market mutual funds. This fact underscored her claims that there was no direct impact on BlockFi’s operations.
BlockFi Reportedly Safe despite Alleged $227M Exposure to Bankrupt Bank
Previous reports said BlockFi could lose a mammoth sum with Silicon Valley Bank despite its safe status. According to these reports, the digital assets lender had an uninsured sum of $227 million in a Silicon Valley Bank fund. However, the bank, an instrumental partner to venture-backed platforms, was shut down on March 10th. At the time, the California Department of Financial Protection and Innovation did not provide reasons for Silicon Valley Bank’s discontinuation.
Reports stated that BlockFi’s investment with Silicon Valley Bank is not a Federal Deposit Insurance Corporation (FDIC) insured deposit. In addition, a March 10th filing indicates that the digital assets lender’s investment has no federal government agency insurance. As a result, BlockFi’s stake with Silicon Valley Bank is “not guaranteed by the bank.”
Although Silicon Valley Bank offered several mutual fund investment services, it does not appear to have managed any of the funds. According to the bankrupt Santa Clara-based bank’s website, this revelation also listed big-name investment platforms as the fund managers. These fund managers include the world’s largest asset manager BlackRock Inc (NYSE: BLK), and financial services platform Morgan Stanley (NYSE: MS).
The Circle Effect
USD Coin (USDC) issuer Circle appears to be directly impacted by the Silicon Valley Bank closure. Furthermore, the peer-to-peer payments technology company also seems to suffer a hit from Silvergate’s bankruptcy.
Circle’s latest audit report revealed it held $8.6 billion, or roughly 20% of its reserves, in several US financial institutions. This included the Bank of New York Mellon (NYSE: BK), Silicon Valley Bank, and Silvergate Bank (NYSE: SI).
Although Circle’s exact investment with Silicon Valley Bank and Silvergate remains unclear, the company issued a recent Twitter statement that read:
“Silicon Valley Bank is one of six banking partners Circle uses for managing the ~25% portion of USDC reserves held in cash. While we await clarity on how the FDIC receivership of SVB will impact its depositors, Circle & USDC continue to operate normally.”
USDC also recently slipped below the $1 peg to $0.98.
Tolu is a cryptocurrency and blockchain enthusiast based in Lagos. He likes to demystify crypto stories to the bare basics so that anyone anywhere can understand without too much background knowledge.
When he’s not neck-deep in crypto stories, Tolu enjoys music, loves to sing and is an avid movie lover.
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