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BlockFi CEO Zac Prince reveals a billion-dollar loss in the ongoing lawsuit, citing crypto loan dealings with Alameda Research and FTX.

In his testimony, BlockFi CEO Zac Prince discussed a billion-dollar loss his cryptocurrency loan company suffered in relation to Alameda Research and FTX during yesterday’s (Friday) hearing in the ongoing lawsuit against Sam Bankman-Fried (SBF).

As per a Coindesk story, BlockFi started working with Alameda Research around 2020 or 2021. Prince brought up the fact that the two businesses had loan arrangements. As of May 2022, BlockFi had subsequently granted Alameda up to USD $1 billion.

FTX

Alameda fully repaid the original loan.

BlockFi’s problems started when the collapse of the Terra Luna cryptocurrency ecosystem caused it to suffer large losses. The lending company started the process of getting its loans back from Alameda in order to make up for these losses. BlockFi surprised everyone by revealing to the jury that Alameda Research had paid back all of the loans, which prompted the company to accept fresh loans totaling $850 million.

In addition to its partnership with Alameda, BlockFi was an FTX client. It allegedly managed customer assets totaling around $350 million on the exchange and retained the collateral that Alameda Research had placed on FTX. BlockFi got into a bad financial spot and lost “a little over a billion dollars” as a result of its connections to FTX and Alameda. This setback compelled BlockFi to file for bankruptcy.

Prince was questioned by Assistant US Attorney Nicholas Roos about the reasons behind BlockFi’s bankruptcy filing. Prince stated that although bankruptcy would have been an option later, the decision was driven by the financial impairment of its money on FTX and loans to Alameda.

The Fall of Alameda and Persistent Issues

But when the hedge fund failed in November 2022, things became worse for BlockFi and Alameda Research’s ostensibly solid collaboration. Even after Grayscale trust shares, FTT, and Robinhood shares were added as collateral, a sizeable amount was still unpaid, which ultimately added to BlockFi’s billion-dollar loss.

BlockFi came under increased scrutiny in July after creditors claimed Prince knew about FTX’s precarious financial situation. As stated by the Committee of Unsecured Creditors in a May court statement that Decrypt referenced, BlockFi knew as early as August 2021 that Alameda Research was overexposed to FTT. Prince is said to have disregarded the dangers in spite of these worries, enabling Alameda Research to obtain loans that were mostly secured by the FTT token.

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