Reports indicate that BlockFi also has $227 million in troubled Silicon Valley Bank, which is uninsured. In particular, SVB does not manage funds directly.
As the saga of close Silicon Valley Bank continued, more victims appeared. The first to feel the burden was Circle, the company behind the popular USDC stablecoin. It tried to withdraw $3.3 billion from the defeated bank but failed.
BlockFi Bankruptcy Case Filing Opens Money In SVB
BlockFi file a Chapter 11 Bankruptcy on November 28, 2022. One of the reasons for this action was the collapse of FTX earlier in the month. The crypto lender is part of FTX and its sister company Alameda Research.
He had loaned it to Alameda Research and failed to take it back before the FTX crash. There are even some issues trying to hold on to $450 million worth of Robinhood shares, which SBF bought and used as collateral for Alameda Capital’s loan.
When the Silicon Valley Bank problem erupted, researchers discovered that BlockFi kept $227 million in SVB’s money market mutual fund (MMMF). SVB’s balance summary statement indicates that these amounts are not insured under the FDIC or other federal government agencies and are not guaranteed by SVB.
Since SVB does not directly manage the funds, BlockFi’s risk will depend on the fund’s performance and not SVB’s financial concerns.
A Brief On Silicon Valley Bank MMMFs
Money market mutual funds invest directly in “highly liquid short-term instruments” like high-quality short-term debt instruments, cash, and cash equivalents. The US Securities and Exchange Commission regulates the fund, and the FDIC’s federal deposit insurance covers up to $250,000 per fund depositor.
SVB offers many mutual fund investment services to his customers. The silver lining is that the bank does not manage the funds directly. Some of the fund managers listed on the website include Morgan Stanley, Western Asset Managementand BlackRock.
Because of the MMMF model, investors in the fund usually get shares for capital. BlockFi will not lose millions in SVB funds.
But one troubling aspect of SVB’s problem is that the bank has always been an investor for investors. They have venture capital and credit investment units that invest directly into many portfolio companies and fund managers.
According to Fortune’s report, several companies SVB has invested in include Spark Capital, Greylock, Sequoia Capital, Kleiner Perkins, Accel, and Ribbit Capital. The company benefits from SVB’s investment to operate optimally.
2 / Like other customers and depositors who depend on SVB for banking services, Circle joins the call for the continuation of this important bank in the US economy and will follow the guidance provided by state and Federal regulators.
– Circle (@circle) March 11, 2023
This may be why Circle has announced that it has joined other investors and companies in calling for the continuation of SVB.
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