In today’s trial, BlockFi CEO Zac Prince took the stand, unleashing a torrent of accusations against FTX crypto exchange and its affiliate, Alameda Research. He made a bold claim that the bankruptcy of his own firm, BlockFi, was a direct consequence of the deceptive financial practices of the aforementioned entities.
BlockFi CEO Was Unaware of Alameda’s Use of FTX Funds
During today’s trial, Zac Prince, the CEO of BlockFi, pointed fingers at the now-defunct FTX crypto exchange and its affiliated trading company, Alameda Research, claiming they are the reason behind his company’s bankruptcy. While on the stand at Sam Bankman-Fried’s criminal trial, he expressed that if he had been aware of the use of inaccurate financial statements, he wouldn’t have distributed any funds.
He shared that BlockFi had a whopping $1.1 billion engaged with the exchange. When questioned about the reason behind BlockFi’s bankruptcy, Prince didn’t hesitate to attribute it to the actions of Alameda and FTX. The loan amount changed between May 2021 to May 2022, increasing from $50 million to $1.1 billion.
The explosion of the LUNA ecosystem had a significant impact on BlockFi. When probed by AUSA Roos regarding the implications for BlockFi, Prince explained that they experienced a default from Three Arrows Capital, which necessitated a substantial collateral liquidation process.
Furthermore, when queried whether BlockFi would have extended loans to Alameda if it had known that FTX customer funds were being used, Prince firmly responded with a “No. That is not appropriate.” He acknowledged that while some of the loans were called, a substantial amount of $650 million remains unsettled.
BlockFi’s Loans, Deals, and a Failed Acquisition with FTX
Prince acknowledged that there was a point when BlockFi considered selling itself to FTX. He elaborated that the decision was driven by a desire to bring additional capital to enhance consumer confidence. FTX had put forth a deal, which was bifurcated into two main components, one of which was a $400 million credit facility.
Prince further disclosed that the deal also encompassed a provision for FTX to potentially acquire BlockFi in July 2023, which was something they anticipated would transpire. However, when queried by AUSA about whether this acquisition actually occurred, Prince confirmed it did not.
When probed about whether BlockFi’s arrangement with FTX influenced its loans to Alameda, Prince described it as a “data point.” The discussion took a turn when AUSA Roos questioned whether BlockFi extended loans to Alameda due to its deal with FTX, which was met with an objection from SBF’s lawyer, Cohen, and subsequently sustained by Judge Kaplan.
Prince did confirm that BlockFi lent to Alameda in 2022, specifying that from July to early November, loans amounting to $850 million were extended.
The trial is anticipated to span approximately six weeks, with the ex-CEO of FTX confronting the possibility of spending numerous decades in jail if found guilty on various charges.
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