Bankrupt crypto lender BlockFi has made headlines with its latest bankruptcy filing, revealing that it has $227 million invested in a money market mutual fund offered by Silicon Valley Bank (SVB). This news comes in the wake of SVB’s recent closure by the California Department of Financial Protection and Innovation (DFPI) on account of its inadequate liquidity and insolvency.
The Justice Department said Silicon Valley Bank documents show the BlockFi account isn’t considered a deposit, isn’t insured by the FDIC, and thus might lose value. The federal watchdog claimed BlockFi ignored warnings earlier this month about the dangers of the uninsured account.
The disclosure comes on the same day that federal regulators seized the bank after its stunning collapse. Silicon Valley Bank had been one of the largest providers of financial services to tech startups including crypto companies.
Meanwhile, insured depositors are expected to get access to their funds by Monday morning. Depositors with funds exceeding insurance caps will get receivership certificates for their uninsured balances, meaning businesses with big deposits stuck at the bank are unlikely to get their money out soon.
Some in the crypto community have noted that BlockFi’s funds may not be at direct risk despite SVB’s troubles. Certain crypto Twitter users argued that BlockFi’s shares’ value would depend on what’s in the Money Market Funds (MMF), not what happens to Silicon Valley Bank.
Aside from BlockFi, numerous other crypto companies have also disclosed their exposure to the bank. For one, Circle, the issuer of the world’s second-largest stablecoin USDC, has revealed that it held an undisclosed part of its $9.8 billion cash reserves at failed Silicon Valley Bank.
The company said in a statement Friday that SVB was one of six banks relied on to manage USDC’s cash reserves, but claims USDC will be able to continue operating normally. Still, the stablecoin has distanced from its target peg of $1 amid a wave of withdrawals.
Furthermore, crypto-focused venture capital firm Pantera may also have an unknown amount of exposure to SVB’s collapse. As recently as last month, the firm counted the failed bank among just three custodians of its private funds, according to a February 3 SEC filing.
The Avalanche Foundation, which supports the Avalanche blockchain, Yuga Labs, the entity behind the Bored Ape Yacht Club NFT project and some other blue-chip collections, as well as Web3 company Proof are some other crypto companies hit hard by the recent collapse of Silicon Valley Bank.
While crypto entities like Binance and Tether have confirmed that they have no exposure to the troubled bank, firms like USD Coin issuer Circle have not been so fortunate. Circle Internet Financial confirmed earlier on 11 March that $3.3 billion of its USDC reserves were stuck in Silver Valley Bank. Ava Labs President John Wu has also stated that his firm relied on SVB’s banking services.
