Zac Prince, the CEO of bankrupt cryptocurrency lending firm BlockFi, allegedly disregarded recommendations from the company’s risk management team over lending assets to Alameda Research.
According to a July 14 filing with the United States Bankruptcy Court for the District of New Jersey by the unsecured creditors’ committee, BlockFi’s risk management teamon the “high risks” associated with lending assets to Alameda. Prince allegedly dismissed concerns from the team on BlockFi lending Alameda $217 million by August 2021. The team suggested there could be risks if the FTX Token used to secure the loans needed to be liquidated.
“As early as August 2021, BlockFi’s risk management team was advised that Alameda’s balance sheet was largely comprised of ‘~7bb unlocked FTT, and 11bb total including locked tokens based on unaudited financials,’” said the filing. “This set off alarms at BlockFi. Mr. Prince dismissed the concerns, urging the risk team to learn to ‘get comfortable [with Alameda] being a three arrows size borrower, just with FTT and other collateral types instead of GBTC shares.
After January 2022, the risk management team stopped issuing memos to Prince on the potential risks of giving loans to Alameda, moving discussions to “offline meetings and Slack,” where the CEO occasionally acknowledged the exposure. BlockFi