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BlockFi Has Cash Access for Staff, Vendors Despite SVB Collapse: Attorney
The company had millions deposited with Silicon Valley Bank but regulators intervened Sunday evening to safeguard all customer monies.
Updated Mar 13, 2023, 5:09 p.m. Published Mar 13, 2023, 2:36 p.m.
BlockFi still has cash access in spite of its significant holdings at collapsed California lender Silicon Valley Bank (SVB), a federal bankruptcy court in New Jersey was told Monday.
In a Friday filing, the U.S Trustee said it had urged the bankrupt crypto lender to move $227 million in uninsured money market funds somewhere safer, in a week that that culminated in SVB being shuttered by California regulators.
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“BlockFi is fine – we have access to cash to operate in the normal course including paying our employees and vendors,” Christine Okike of Kirkland and Ellis told the court on behalf of the company.
“We expect to have access to $37 million of the $278 million at SVB later today,” Okike said, adding that $236 million was invested in “highly rated money market funds” run by BlackRock and Morgan Stanley, with SVB acting as agent on behalf of BlockFi.
The New Jersey bankruptcy court had banned BlockFi from investing in secondary financial markets, according to a filing by U.S. Trustee Andrew Vara made on Friday. In a series of letters starting Feb. 17, Vara, a Department of Justice official responsible for bankruptcy matters, urged the lender to shift the funds somewhere where it would be protected by a government guarantee from the Federal Deposit Insurance Corporation (FDIC).
Lawyers for BlockFi had sought to argue that the funds should stay where they were, as credit ratings were sound and the investment generated $10 million a year for the estate, Vara said.
Okike told the court on Monday that she will work with the U.S Trustee to ensure compliance with the bankruptcy code as soon as the company has access to the funds again.
Early Monday morning, the FDIC said it had transferred SVB deposits to a new bridge bank operated by the regulator.
BlockFi filed for bankruptcy in November last year, as part of the fallout from the collapse of crypto exchange FTX.
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