Casey Wagner

Katherine Ross

BlockFi and FTX have reached a tentative agreement to settle all litigation and disputes, according to a Wednesday afternoon court filing.&nbsp;



The settlement, which also involves affiliated debtors, remains subject to court approval. But the announcement represents a significant development in a long-running legal process that began after FTX’s collapse in 2022.



<a href="https://blockworks.co/tag/blockfi">BlockFi</a>, as part of the plan, will receive $185.2 million as a customer claim against the FTX debtors. The bankrupt lender will receive a separate claim of $689 million against <a href="https://blockworks.co/tag/alameda-research">Alameda</a>, which accounts for former loans.&nbsp;



The total works out to around $900 million, though only $250 million is secured.



“BlockFi ensures that it will receive that $250 million shortly after the FTX plan is confirmed and goes effective – likely allowing a second interim distribution in the near term, before distributions begin on general FTX unsecured claims,” Mohsin Meghji, BlockFi’s plan administrator, wrote in the Wednesday filing.



Read more: <a href="https://blockworks.co/news/blockfi-bankruptcy-chapter-11">BlockFi emerges from bankruptcy less than a year after FTX collapse</a>



The other claims will receive distributions based on the <a href="https://blockworks.co/tag/ftx">FTX</a> plan and will be treated similarly to other claims.



FTX will waive the settlement claims against BlockFi as part of the agreement. BlockFi, in turn, will support the FTX plan and vote in favor of it.



“This negotiated agreement represents an excellent outcome for BlockFi and its customers – one better than could have been anticipated even on the effective date of the Plan,” it continued.&nbsp;



The settlement agreement comes months after a US bankruptcy court judge in November lifted an automatic holding that prevented the companies from continuing proceedings. 



Crypto lending platform BlockFi filed for Chapter 11 bankruptcy in November 2022 following FTX’s implosion. BlockFi CEO and founder <a href="https://blockworks.co/tag/zac-prince">Zac Prince</a> testified as a government witness in October during FTX founder Sam Bankman-Fried’s criminal trial, stating that Bankman-Fried’s actions <a href="https://blockworks.co/news/sam-bankman-fried-trial-day-8">“forced” his company into bankruptcy</a>.



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FTX, BlockFi score tentative settlement agreement

What do Chinese bribes, Saudi Crown Prince Mohammed Bin Salman, Toyota Corollas, Thai sex workers, and a lack of haircuts all have in common? Sam Bankman-Fried, allegedly.



Bankman-Fried, who faces seven counts of fraud and conspiracy related to the collapse of his companies Alameda Research and FTX, wrapped up his second week in court Friday afternoon in Manhattan.



The jury trial is scheduled to last six weeks, although prosecutors might be slightly ahead of schedule, they told the court Friday. The government expects to rest its case on Oct. 26 – one day earlier than planned – perhaps thanks to the defense taking just half a day on their cross-examination of ex-Alameda CEO Caroline Ellison.&nbsp;



During the second week, four government witnesses testified. This has allowed the prosecution to start illustrating the alleged inner workings of Bankman-Fried’s now-tumbled empire to the jury. Here’s what you missed during the last four days of trial: 



<h2 class="wp-block-heading">Who knew what and when did they know it?&nbsp;</h2>



The question of who exactly knew what was going on at Alameda and FTX — and, importantly, when they discovered it — is essential in the government’s quest to prove that Bankman-Fried and his top executives conspired to commit fraud.&nbsp;



One, and perhaps the only, win the defense got when cross-examining Ellison Thursday was when the ex-CEO admitted that she told prosecutors early on that at one point, Bankman-Fried <a href="https://blockworks.co/news/caroline-ellison-cross-examination">may not have known exactly where fiat FTX customer deposits</a> were being held.&nbsp;



“I recalled saying that…he might not know this was happening,” Ellison said on the stand, referring to what she may have told prosecutors during a December 2022 meeting. “Something like that.”&nbsp;



Read more: <a href="https://blockworks.co/news/caroline-ellison-testimony-hidden-gems">5 hidden gems from Caroline Ellison’s FTX testimony you might’ve missed</a>



Defense lead counsel Mark Cohen was specifically wondering if <a href="https://blockworks.co/tag/caroline-ellison">Ellison</a> had spilled to the government that Bankman-Fried may have been unaware that FTX customer fiat wire transfers were still going to the Alameda-controlled “North Dimension” bank account, even after the exchange made a switch.&nbsp;



Some legacy FTX customers still transferred funds to North Dimension even after exchange operators had created an account under the <a href="https://blockworks.co/tag/ftx">FTX</a> name, Ellison said.&nbsp;



The government has maintained that Bankman-Fried was the ringleader at Alameda, even though on paper it appeared to be co-CEOs Caroline Ellison and Sam Trabucco. Ex-employees have backed up this narrative.&nbsp;



“[Bankman-Fried maintained direct communication with Alameda employees,” former software engineer Christian Drappi told the court Thursday.&nbsp;



Bankman-Fried still had access to trading data and weighed in on big decisions even after he publicly stepped away from the trading firm, Drappi added.&nbsp;



<h2 class="wp-block-heading">Caroline spent a lot of time “very stressed out”&nbsp;</h2>



Between the allegations of <a href="https://blockworks.co/news/sam-bankman-fried-trial-day-6">bribes to Chinese officials</a> and taking nearly a minute to identify her ex-boyfriend and former boss in the courtroom, it’s no wonder Ellison’s days-long testimony has ruled headlines this week.&nbsp;



Most of her time at Alameda was spent under pressure, she told jurors Wednesday. She uttered the phrase “very stressed out&#8221; three separate times during her testimony. Her fears stemmed from Alameda’s balance sheet, which became more troubling by the day as its liabilities increased throughout 2022, she said. 



Ellison testified that at Bankman-Fried’s direction, she created <a href="https://blockworks.co/news/caroline-ellison-testifies-chinese-bribe">seven false, or, as Bankman-Fried called them, “alternative,” balance sheets</a> to send over to Genesis. Given worsening market conditions, Matt Ballensweig, head of lending at Genesis, asked for an update on Alameda’s financials.&nbsp;



“I was very stressed out,” Ellison said about the request, marking the second time she mentioned her tense mental state.&nbsp;



“I wanted to reassure them about Alameda&#8217;s financial state, but the facts were that Alameda was in a very bad situation… we had been borrowing increasing amounts of money from FTX customers,” Ellison added.&nbsp;



Read more: <a href="https://blockworks.co/news/sam-bankman-fried-opening-statements">Sam Bankman-Fried ‘lied to the world,’ prosecution posits in opening statement</a>



“I don&#8217;t think we can send this to Genesis,” Ellison told Bankman-Fried after she had crunched the real numbers, which tallied Alameda’s total liabilities at more than $14 billion in June 2022. 



The pair picked one of the seven aforementioned “alternative” balance sheets to share with Ballensweig instead, Ellison testified.&nbsp;



Ballensweig later told Ellison and Bankman-Fried that Genesis needed $500 million repaid from their loans. Genesis was in a dire situation, Ellison testified.&nbsp;



“Genesis really needed the money and implied that they might go under or have to default on some loans if they didn&#8217;t get it,” Ellison told the jury.&nbsp;



Genesis declared<a href="https://blockworks.co/news/the-next-bankruptcy-domino-may-be-genesis"> bankruptcy in January</a>, roughly two months after FTX and Alameda did the same.&nbsp;



<h2 class="wp-block-heading">Not just the Ellison show</h2>



The week was undoubtedly dominated by the testimony of the ex-Alameda CEO, but three other witnesses also took the stand.



One such witness, an ex-Alameda employee, not only gave insight into what it was like in the final days of the company, but also into the <a href="https://blockworks.co/news/caroline-ellison-alameda-tell-all">fateful all-hands meeting hosted by Ellison</a> on November 9, 2022.



The government played six audio clips from the meeting, which a former Alameda employee who had worked there less than a week recorded. The defense played one additional clip from the recording during their cross-examination.&nbsp;



Prior to the clips being played for the court, Drappi set the scene.&nbsp;



He said that he was “utterly shocked” about the Bankman-Fried tweet in 2022 declaring that Binance was planning to acquire FTX. A plan that would later fall through



“[Ellison told us that FTX] had a shortfall of user funds and that this was caused by <a href="https://blockworks.co/news/caroline-ellison-testifies-sbf-trial">Alameda borrowing user funds from FTX</a> to repay its prior loans, and it had used those prior loans to make illiquid investments in various different ventures and just companies,” Drappi testified.&nbsp;



While delivering this “utterly shocking” news, Ellison was slouched on a bean bag chair in the Hong Kong office, Drappi added.



Read more: <a href="https://blockworks.co/news/sbf-trial-gary-wang-alameda">Alameda was spending more trading than FTX was making in revenue: Co-founder</a>



In the clips played for the jury, Ellison told Alameda employees that FTX was trying to raise investor money in order to repay customers, a response that raised alarm bells for Drappi.&nbsp;



“Generally, when a company raises money, it&#8217;s about, you know, an exciting, you know, future growth and not to fill a hole in a balance sheet,” he said.&nbsp;



Also caught on tape, Drappi asked Ellison who knew about all this secret borrowing Alameda had been doing.&nbsp;



“I’m not even sure if I knew exactly who was aware,” Ellison responded on the recording.&nbsp;



“Sam [Bankman-Fried], I guess” allowed it, she added.&nbsp;



Ellison’s demeanor at the all-hands was described by Drappi as being “sunken.”&nbsp;



She can be heard on the clips laughing, a fact defense was keen to point out, but Drappi testified that he’d classify this as “nervous laughter.”&nbsp;



“Thanks,” Ellison said after an employee thanked her for her honesty in the final clip, which was played by the defense.&nbsp;



“I mean, it was kind of fun,” she added, again laughing.&nbsp;



<h2 class="wp-block-heading">The government is telling a story, and it’s pretty good&nbsp;</h2>



Rounding out four days of explosive testimony was the government’s final witness of the week: Zac Prince, founder and former CEO of now-bankrupt lending firm BlockFi.&nbsp;



The jury has heard from FTX customers and ex-employees – and there will be more witnesses from both categories, the government has said – but Prince offers a unique perspective.&nbsp;



BlockFi not only lent to Alameda, it also kept assets – some of which were on behalf of their own customers – on the FTX exchange. Combined, the values add up to $1 billion, Prince told the jury Friday. His company filed for bankruptcy in November 2022, just over two weeks after FTX and Alameda had themselves filed.&nbsp;



“Once it became clear that repayment of the Alameda loans and being able to access the funds that we had on FTX was impaired… Our view of the financial health of BlockFi’s business was such that we needed to declare bankruptcy,” Prince testified.&nbsp;



During roughly an hour of cross-examination on Friday, Bankman-Fried&#8217;s attorneys did manage to find some inconsistencies in Prince&#8217;s testimony.



Cohen referenced several internal documents at BlockFi where the lenders and their risk team outlined the many risks associated with lending to Alameda. BlockFi never received audited financial statements, Alameda was already over on its credit limit and its posted collateral was volatile, to name a few.&nbsp;



Still though, Prince maintained that he believes BlockFi would still be running had Alameda and FTX not collapsed.&nbsp;



“I don&#8217;t think BlockFi would have filed for bankruptcy in November of 2022 if the Alameda loans were still in good standing and the funds we had at FTX were accessible,” he said.&nbsp;



The jury trial continues Monday in Manhattan with the government’s next witnesses, FTX customer Elan Dekel and FBI special agent Richard Busick.



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Here’s what you missed during week 2 of the Sam Bankman-Fried trial

James Cirrone

FTX co-founder Sam Bankman-Fried faces seven federal charges in a criminal trial taking place in Manhattan. The former crypto exchange exec is accused of misappropriating billions of dollars of customer funds for real estate, donations, political contributions and investments.&nbsp;



The current state of play: Caroline Ellison’s time in the courtroom is over after a short cross-examination. A former Alameda employee took the stand after her to recount a November 2022 all-hands meeting. Former BlockFi CEO Zac Prince began his testimony yesterday, which continues today. <a href="https://blockworks.co/news/sam-bankman-fried-trial-day-7">Read more here</a>.



<hr class="wp-block-separator has-alpha-channel-opacity"/>



<h2 class="wp-block-heading">1:45 pm ET: Court adjourns for the weekend</h2>



The end of week two saw the conclusion of ex-BlockFi CEO Zac Prince’s testimony. He was one of the first government witnesses to really speak to the jury, rather than just the courtroom or lawyers.&nbsp;



Prince confirmed that BlockFi started lending to Alameda at the end of 2021. He added, though, that had BlockFi known that Alameda was borrowing from FTX, then “I think we wouldn’t have worked with them.”



Unfortunately for Prince, they didn’t know and ended up lending around $1 billion to Alameda because they were a “good borrower.”



At one point, as Prince was discussing both due diligence and know-your-customer (KYC) policies, Bankman-Fried appeared to scribble on a post-it and passed it to his lawyer. Oh to be a fly circling around SBF? You get the point, we want to see the Post-it.



Prince was also engaging enough for SBF to let his laptop screen turn off from inactivity, though he was seen shaking his head at certain points — including when Prince was discussing FTX US.



The former CEO confirmed that balance sheets were one of the primary ways for BlockFi to gauge the health of Alameda specifically. Ellison, earlier this week, testified that she — for Genesis, not BlockFi — once came up with seven different balance sheets for Bankman-Fried to pick from and share with the lender.&nbsp;



Prince testified that the balance sheet he received from Alameda made BlockFi believe that the former firm “remained a good candidate for lending.”&nbsp;



Bankman-Fried’s father, who had been in attendance pretty much every day of the trial, left the courtroom during Prince’s direct examination.&nbsp;



SBF’s team took a crack at Prince to end the day.&nbsp;



Prince confirmed to Cohen that BlockFi “frequently received” audited financials, though crypto firms were “majority unaudited” because crypto firms struggled to make deals with auditors. Prince added that it was possible to only choose to lend to audited borrowers. Lesson learned?



Cohen also introduced an internal credit memo where BlockFi’s risk management team advised against lending to Alameda because of its exposure to FTT months before BlockFi eventually gave Alameda a loan.&nbsp;



At the end of the day on Friday, prosecutors teased FTX’s former chief of engineering, Nishad Singh, as a possible witness next week. Two former FTX customers, an FBI agent, and an FTX employee named Delaney Ornelas are also slated to testify.



<h2 class="wp-block-heading">12:00 pm ET: Could the prosecution’s strategy pay off?</h2>



Week two solidified the current approaches of both the prosecution and defense teams.&nbsp;



The approaches, like anything in a trial this big, are subject to change — especially as we expect a six-week long trial.&nbsp;



But, for now, the prosecution came out with a very clear strategy: put their biggest witnesses — the former Alameda CEO, Caroline Ellison, and <a href="https://blockworks.co/news/gary-wang-ftx-not-fine">FTX co-founder Gary Wang</a> — up first.&nbsp;



Opinion editor Molly Jane Zuckerman <a href="https://blockworks.co/news/sam-bankman-fried-defense-dropping-ball">commented on the defense’s strategy</a>, saying that the defense’s initial crack at Ellison contained repeated misstatements and conflations of different FTX money accounts. This led the prosecution to declare that the cross-examination was confusing, a point that Judge Lewis Kaplan agreed with.



To learn more, Blockworks reporter Ben Strack <a href="https://blockworks.co/news/sam-bankman-fried-law-expert-jack-sharman-trial-outcome">conferred with Jack Sharman</a>, a white-collar attorney on the strategy.



“If I had to place a wager right now, it’s still early days, but I think I’d bet on a conviction,” Sharman told Strack.&nbsp;



Sharman noted that, in his experience, jurors can be skeptical of the CEO attempting to argue that they didn’t know what the subordinates were doing.&nbsp;



“Unless there’s some real evidence I think you can bring out on [cross-examination] to establish that, I think most jurors don’t like that,” Sharman said.



In Thursday’s cross-examination, SBF lawyer Mark Cohen <a href="https://blockworks.co/news/sam-bankman-fried-trial-day-7">tried to do just that with Ellison</a>. Cohen, through questioning, was able to get Ellison to admit that Bankman-Fried wasn’t always looking over her shoulder.&nbsp;



A point that the prosecution made sure to make fairly quickly in their direct examination of the ex-Alameda CEO.&nbsp; “There were times when” Bankman-Fried wouldn’t be paying much attention to Alameda, Ellison said. However, Ellison also claims that she committed crimes at SF’s direction and that Bankman-Fried told her to send <a href="https://blockworks.co/news/sam-bankman-fried-day-5">falsified balance sheets</a> to deceive both investors and lenders.



<h2 class="wp-block-heading">10:30 am ET: Zac’s back</h2>



Former BlockFi CEO Zac Prince is testifying this morning to kick off what will be a short day in court. On Thursday, Judge Lewis Kaplan said he wants to end the court day at 1 pm ET.



Prince’s name was floated by prosecutors at the end of the week, though he was switched out for ex-Alameda CEO Caroline Ellison.&nbsp;



BlockFi <a href="https://blockworks.co/news/blockfi-bankruptcy-chapter-11-greenlight#:~:text=BlockFi's%20Chapter%2011%20plan%20received,following%20the%20collapse%20of%20FTX.">declared bankruptcy</a> in late November 2022, just weeks after FTX fell apart. In the eight minutes of testimony from Prince yesterday, he very quickly focused on how the FTX and Alameda collapse impacted BlockFi.&nbsp;



“As a result of FTX and Alameda&#8217;s bankruptcy, because of our lending to Alameda but also some exposure we had to the FTX platform, BlockFi was forced into…bankruptcy,” <a href="https://blockworks.co/tag/zac-prince">Prince</a> said.



Prince’s short testimony backs up what the committee of unsecured BlockFi creditors found when they <a href="https://blockworks.co/news/blockfi-creditor-report">released a 92-page investigation</a> into the firm’s collapse back in July.&nbsp;



However, while the report detailed the relationship between the former lender and crypto hedge fund, it also found that the risk management team warned Prince of potential risks related to the Alameda loans.



Read more: <a href="https://blockworks.co/news/sam-bankman-fried-law-expert-jack-sharman-trial-outcome">White-collar defense lawyer weighs in on SBF trial: ‘If I had to place a wager…’</a>



A 2021 memo from <a href="https://blockworks.co/tag/blockfi">BlockFi</a>’s credit risk team cautioned that Alameda had “wrong-way risk, had unaudited financials, relied on illiquid tokens, and was offering volatile collateral.”&nbsp;



Former Chief Risk Officer Rene van Kesteren, according to the investigation, was “uncomfortable with the risk profile presented by additional FTT as collateral.”&nbsp;



Prince reportedly “expressed interest” in doing more business with <a href="https://blockworks.co/tag/alameda-research">Alameda</a>. Per the report, he even “pushed to increase exposure to (and revenue from) Alameda by allowing Alameda to use FTT as collateral, despite concerns from the risk management team regarding its illiquidity.”



In his testimony Thursday, Prince admitted that “there was a time that we called back all the open-term loans that we had to Alameda, which was in June of 2022.”&nbsp;



And yet, by the time Alameda declared bankruptcy, the firm owed BlockFi a staggering $650 million.



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BlockFi ‘forced’ into bankruptcy following FTX, Alameda collapses: SBF trial live updates

FTX co-founder Sam Bankman-Fried faces seven federal charges in a criminal trial taking place in Manhattan. The former crypto exchange exec is accused of misappropriating billions of dollars of customer funds for real estate, donations, political contributions and investments.&nbsp;



The current state of play: Caroline Ellison’s cross-examination is officially underway after a bit of a hectic direct examination. On Wednesday, Ellison alleged bribes to Chinese officials, fake balance sheets, and a careful approach to written communication for fear of “legal trouble.” <a href="https://blockworks.co/news/sam-bankman-fried-trial-day-6">Read more here</a>.



<hr class="wp-block-separator has-alpha-channel-opacity"/>



<h2 class="wp-block-heading">5:40 pm ET: And that’s a wrap…on Ellison</h2>



Ellison’s testimony is over, which elicited surprise out of the courtroom as many expected her testimony to last throughout Thursday and even possibly through Friday.&nbsp;



Cohen’s cross-examination of Ellison continued after lunch but was mostly retreaded ground, with Cohen bringing up the <a href="https://blockworks.co/news/caroline-ellison-testifies-chinese-bribe">seven alternative balance sheets</a> that Ellison alleges Bankman-Fried requested.



Other topics included the infamous “things Sam is freaking out about” list and the potential investment from a Saudi prince — did we move on from this too quickly? — and the relationship between crypto trading firm Modulo and Alameda. SBF invested in Modulo, which is run by former Jane Street employees (and another ex-girlfriend of his).&nbsp;



“Didn’t part of you want to crush them?” Cohen asked Ellison, referring to Modulo. Ellison confirmed she did.



Ellison admitted to “wrongdoing” at the Alameda all-hands meeting back on Nov. 9 when pressed by Cohen. 



Prosecutor Sassoon once again brought up the meeting when she took over redirect after the defense rested.



Ellison said she “was asked many follow ups” by Alameda employees at the meeting, which was later revealed to be attended by 25 people. Ellison told her subordinates that she, Bankman-Fried, Gary Wang, Nishad Singh were aware of Alameda borrowing FTX funds and that it was Bankman-Fried’s decision to do so. What a sigh of relief that must have been for Ellison, who admitted how guilty she felt about lying when she was on the stand Wednesday.



“I never liked misleading my employees…but I felt trapped in the summer of 2022,” Ellison said. But now that FTX was already crumbling and would go bankrupt in just two days, she explained she felt more free to disclose the truth.&nbsp;



Ellison was excused shortly after this, and the government then called former Alameda software engineer Christian Drappi to the stand.&nbsp;



Before he was called, it was revealed that the government would be playing six clips of — you guessed it! — the aforementioned all-hands meeting.



Drappi, on the stand, gave the courtroom a sneak peek into what it was like to work for Alameda in the moments leading up to what we now know as the beginning of the end of both Alameda and FTX. He referred to Ellison as “sunken” and said that the in-person attendees (15, to be exact) gathered in a circle around the CEO, who was on a bean bag.



“She did not display confident body language,” Drappi testified, adding that she was “kind of slouching.”



As an added bonus, the Alameda employee who recorded the all-hands meeting had been employed by the soon-to-be bankrupt firm for — drumroll, please — three days.&nbsp;



To sum up, Ellison tells her employees that Alameda had sought open term loans to fund illiquid investments. To pay back those loans, Alameda doubled up and borrowed from FTX customers, she further explained.&nbsp;



Alameda employees at the time, including Drappi, are heard on the recording asking Ellison questions about whether there was a plan to pay back FTX customers, what the illiquid investments were, and which people were in the know about this “wrongdoing,” as Ellison described in her testimony.



Ellison’s responses to her employees were marked by nervous laughter, a lot of ‘likes,’ and a lot of ‘ums.’



BlockFi’s ex-CEO Zac Prince is in the building. Or, rather, on the stand. His testimony, which began late Thursday, is expected to pick back up on Friday morning.



In the roughly eight minutes prosecutor Nicholas Roos had with Prince, the jury was informed that Alameda owed BlockFi, a crypto lender, $650 million at the time Alameda and FTX collapsed.



“Because of our lending to Alameda” but also “FTX exposure” BlockFi was forced into bankruptcy,” Prince testified



<h2 class="wp-block-heading">1:10 pm ET — The spreadsheets return</h2>



Caroline Ellison, ex-Alameda Research CEO and the on-again-off-again girlfriend of Sam Bankman-Fried, remained on the stand Thursday. Defense attorney Mark Cohen got to start his cross examination of the government’s emerging star witness on the seventh day of trial after being cut off by Judge Lewis Kaplan on Wednesday afternoon.



There were several revelations worth noting.



Ellison testified about a particular Google document she wrote before the collapse of FTX and Alameda. She had noted that she and Sam Trabucco — who was co-CEO of Alameda before he “took a step back” at the end of 2021 and eventually resigned in the summer of 2022 — weren&#8217;t the best managers with respect to pushing their employees to be better.&nbsp;



Cohen was also able to establish that Bankman-Fried wasn’t always looking over Ellison’s shoulder at Alameda, bolstering the defense’s argument that perhaps he wasn’t as involved in the day-to-day decisions as the government claims he was.



“There were times when” Bankman-Fried wouldn’t be paying much attention to Alameda, Ellison said.



Cohen also zoomed in on the previously-mentioned bug in Alameda’s code that overstated its fiat liability to FTX by roughly $8 billion. Ellison confirmed that after the bug was fixed sometime in June 2022, Alameda’s net asset value (NAV) was positive.&nbsp;



What Cohen didn’t get Ellison to admit was that Alameda was, in fact, solvent at that time. This was no doubt a strategy to portray Alameda in a decent position. Ellison didn’t answer yes or no to the question, saying it depended on market conditions.&nbsp;



Alameda’s balance sheets were also a popular topic of questioning for the government during its direct examination on Wednesday.&nbsp;



Ellison referred to many of the balance sheets she sent to Genesis and other third party lenders as “dishonest.” <a href="https://blockworks.co/news/caroline-ellison-testifies-chinese-bribe">Bankman-Fried asked her to prepare seven different alternative balance sheets</a> to send to lenders that portrayed Alameda’s financial condition in a better light, she testified Wednesday.&nbsp;



Cohen inquired about the quarterly balance sheets Ellison prepared in 2021. Ellison responded that she didn&#8217;t find those misleading, unlike the ones she&#8217;d prepare and send to lenders later.



There were a total of three sidebars, each one wearing on the patience of Judge Kaplan. When the defense asked for a second sidebar at around 9:50 am ET, less than 20 minutes into the start of the day, the judge shook his head, visibly exasperated.



“Let’s try to reduce these sidebars,” the judge said.



Even before the sidebar bonanza, Cohen’s start was decidedly unusual, even by Kaplan’s standards. Bankman-Fried’s lead defense attorney started by asking about Ellison’s cooperation agreement with the government, which the judge found to be quite unusual.



“In almost thirty years…most cross examiners have ended with what you just did,” Kaplan said.



Cohen’s response? He was just “trying to switch it up.”



<h2 class="wp-block-heading">12:40 pm ET: A review of the defense</h2>



Being a lawyer seems tough. Now that we’re on day seven, we’re kind of court experts. Well, experts when it comes to this courtroom with Judge Lewis Kaplan and this set of lawyers.



Blockworks opinion editor Molly Jane Zuckerman <a href="https://blockworks.co/news/sam-bankman-fried-defense-dropping-ball">reviewed the defense’s strategy</a> — so far, mind you, it’s only day seven — and found that the defense’s strategy wasn’t as strong as she might have expected prior to her day [visiting] in court.



Throughout the trial so far, there have been moments where the judge has been seen growing slightly frustrated with both the prosecution and the defense. In the defense’s case, it was evident last week when the judge scolded one of Bankman-Fried’s attorneys, Christian Everdell, for being too repetitive.&nbsp;



On Tuesday, however, Judge Kaplan turned his attention to prosecutor Danielle Sassoon.&nbsp;



“A little repetitive,” he warned after the morning break.



Read more: <a href="https://blockworks.co/news/sam-bankman-fried-law-expert-jack-sharman-trial-outcome">White-collar defense lawyer weighs in on SBF trial: ‘If I had to place a wager…’</a>



Both the prosecution and defense were asked by Kaplan mid-day if they could “try to hold the sidebars to a minimum from now on.”



Additionally, in sidebar conversation (held after Kaplan asked for the sidebars to be held to a minimum) Kaplan had to tell both the prosecution and the defense to “stop interrupting each other.”



He also asked, after a flurry of “midnight” letters in the case — filed by both the prosecution and the defense in relation to topics that could be broached with witnesses on the stand, among other things — the judge seemed to lose his patience with the filings.&nbsp;



“No, no, no, no, no,” Judge Kaplan said. “We’re having a moratorium on late-evening letters.”



The judge’s impatient answer came after prosecutor Danielle Sassoon said she was “weary” of filing a “late-evening letter.”&nbsp;



For those of you <a href="https://blockworks.co/news/sam-bankman-fried-law-expert-jack-sharman-trial-outcome">intent on learning more about legal strategy</a>, Blockworks reporter Ben Strack chatted with a white-collar lawyer to gauge his thoughts on how the defense and prosecution should approach the trial.



<h2 class="wp-block-heading">10:00 am ET: Caroline Ellison’s cross-examination really begins</h2>



In the four-hour-long direct examination of the former Alameda co-CEO and on-again-off-again Sam Bankman-Fried love interest, Caroline Ellison, a lot of tea was spilled.&nbsp;



Specifically, she alleged <a href="https://blockworks.co/news/sam-bankman-fried-trial-day-6">Chinese bribes using Thai sex workers</a>, and that Genesis reportedly requested a return of $500 million due to potential concerns in the summer of 2022, before the bankruptcy filing in January 2023. Moreover, former executives at FTX are said to have embraced a culture of secrecy in hopes of avoiding, well, a trial. Guess that idea didn’t pan out.



Read more: <a href="https://blockworks.co/news/caroline-ellison-testifies-chinese-bribe">SBF demanded 7 versions of Alameda’s balance sheet, Ellison testifies</a>



Let’s go over some highlights that may have been overlooked yesterday.



Ellison alleges that SBF “said that he wanted FTX to have the image of being a, you know, exciting, innovative place to trade on, similar to offshore exchanges, but also being safe, reliable, audited, and highly regulated, like other US exchanges.”&nbsp;



If what Ellison, <a href="https://blockworks.co/tag/gary-wang">FTX co-founder Gary Wang</a> and former FTX employee Adam Yedidia have said about FTX so far during this trial has any ounce of truth, then the key word there is “image.”



Bankman-Fried, Ellison alleges, “always directed us to be careful about what we put in writing” so that they wouldn’t “get in legal trouble.” Boy, do we have news for you, Sam…



Ah, and SBF’s Toyota Corolla got another mention in testimony yesterday. Specifically, Ellison alleges that she and Bankman-Fried were both originally “assigned luxury company cars” but then SBF swapped to a Corolla and Ellison got a Civic, because it was better for their images.&nbsp;



Last week, the defense — specifically Chrisitan Everdell — <a href="https://blockworks.co/news/sam-bankman-fried-trial-day-4">asked former FTX employee Adam Yedidia</a> if he recalled seeing a Corolla, in an apparent attempt to show that Bankman-Fried didn’t splurge on expensive items.



Ellison also added that personal image was very important to SBF. When asked what Bankman-Fried’s personal appearance looked like in 2022, she said “I would say he looked like he didn&#8217;t put a lot of effort into his personal appearance. He dressed sort of sloppily and didn&#8217;t cut his hair often.”



Read more: <a href="https://blockworks.co/news/caroline-ellison-testimony-hidden-gems">5 hidden gems from Caroline Ellison&#8217;s FTX testimony you might&#8217;ve missed</a>



But actually, Bankman-Fried allegedly believed, “his hair had been very valuable. He said ever since Jane Street, he thought he had gotten higher bonuses because of his hair and that it was an important part of FTX&#8217;s narrative and image.” Perhaps that explains the pre-trial haircut.



Another moment worth highlighting was a sidebar that we’re now privy to thanks to the invaluable work of court reporters. According to Wednesday’s Court transcripts, the prosecution complained to Judge Lewis Kaplan and SBF’s lawyer, Mark Cohen, in a sidebar conversation.&nbsp;



Prosecutor Danielle Sassoon alleged that Bankman-Fried “has laughed, visibly shaken his head, and scoffed.” Sassoon was concerned, she said, about the impact it could have on Ellison due to the “history of this relationship, the prior attempts to intimidate her, the power dynamic, their romantic relationship.”



Sassoon, presumably, was referring to the alleged leaking of Ellison’s diary to a New York Times reporter. Bankman-Fried was accused of the leak by the prosecution, and his bail was revoked just months before the trial started.&nbsp;



In response, the judge admitted that he had not been looking for a response from Bankman-Fried and therefore did not see anything. However, he directed Cohen to talk to SBF “and if he&#8217;s doing anything, it should stop; and if he&#8217;s not, then no harm, no foul.”



There were actually so many sidebars yesterday that the Judge — at the end of the day Wednesday — instructed the lawyers to “hold the sidebars to a minimum from now on.”



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Former BlockFi CEO blames FTX, Alameda for bankruptcy: SBF trial live updates

“It is time” for <a href="https://blockworks.co/tag/blockfi">BlockFi</a> creditors to know what BlockFi was and who former CEO “Zac Prince truly is,” BlockFi’s Official Committee of Unsecured Creditors said in a new court filing.&nbsp;



The UCC is pushing for the court to either appoint a Chapter 11 trustee, terminate the exclusivity periods for the debtors or convert the cases to Chapter 7 proceedings.&nbsp;



Voyager, Celsius and even FTX customers understand the majority of what happened to the respective companies through the collapses. However, the UCC argues, BlockFi customers do not yet have a clear understanding of <a href="https://blockworks.co/news/blockfi-bankruptcy-exit-plan">what happened which is “facilitating case mischief.”</a>



$16 million per month is being burned on BlockFi’s cases, according to the filing.



A Chapter 11 trustee is necessary, the UCC says, because “the Investigative Report reveals, in great detail, that BlockFi (Mr. Prince in particular) perpetrated a fraud on customers.”



Read More: <a href="https://blockworks.co/news/how-blockfi-went-from-tech-unicorn-to-crypto-burnout">How BlockFi Went From Tech Unicorn to Crypto Burnout</a>



BlockFi’s debtors also “broke their own promises to customers by liquidating nearly $240 million in customers’ crypto.”



However, the Court could also open up the plan exclusivity. The UCC claims that BlockFi took too long to propose a plan — with the cases lasting seven months, with <a href="https://blockworks.co/news/blockfi-reorganization-plan-approval">two plans “dead on arrival.”</a>



The UCC also claims that the debtors “resorted to their illegal and utterly cockamamie solicitation (smear) campaign a month ago” which “spread lies” to the customer base — spanning over 600,000 investors — and skirted the UCC.



And, finally, the court could convert the case to a Chapter 7 case. 



A Chapter 7 would allow for the liquidation of a “debtor’s nonexempt property and the distribution of the proceeds to creditors,” <a href="https://www.uscourts.gov/services-forms/bankruptcy/bankruptcy-basics/chapter-7-bankruptcy-basics">according</a> to the US courts. 



UCC says that mediations have now failed, and both the debtors and the UCC are “at a complete standstill” and the debtors “shill” for the insiders — which would include Prince.



This is not the first time that the <a href="https://blockworks.co/news/blockfi-halts-plan-to-return-crypto">debtors and creditors have had public disagreements</a>. In February, debtors accused the creditors of being “divorced from reality” and the creditors accused the debtors of throwing a “temper tantrum.”



Last week, the <a href="https://blockworks.co/news/sec-foregoes-blockfi-penalty">SEC announced that it would</a> “forego” the $30 million penalty from BlockFi until investors have been repaid. The bankrupt lender <a href="https://blockworks.co/news/blockfi-customer-withdrawals-summer">plans to open up customer withdrawals</a> sometime this summer. 



BlockFi <a href="https://blockworks.co/news/blockfi-files-for-bankruptcy">filed for bankruptcy in November of last year</a> after FTX collapsed.



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BlockFi’s UCC claims former CEO Zac Prince ‘personally profited’ from company

Shalini Nagarajan

BlockFi, the crypto lender bailed out by FTX earlier this year, has suspended withdrawals only two days after assuring users that it was fully operational.



In a <a href="https://twitter.com/BlockFi/status/1590875997351866368" target="_blank" rel="noreferrer noopener">tweet</a> late Thursday, BlockFi said it cannot operate suitably due to uncertainty surrounding FTX.com, FTX US and Alameda Research. Co-founder Flori Marquez had earlier <a href="https://mobile.twitter.com/FounderFlori/status/1590030310787657729" target="_blank" rel="noreferrer noopener">tweeted</a> the firm remained an independent entity despite its bailout deal with FTX — implying that it was mostly unaffected by the exchange&#8217;s implosion.



But events quickly turned. The Hoboken, New Jersey-based firm has now warned against depositing into BlockFi wallets or interest accounts, which are still advertised to offer up to 10% annual percentage yield on deposits.



&#8220;We are shocked and dismayed by the news regarding FTX and Alameda. We, like the rest of the world, found out about this situation through Twitter,&#8221; BlockFi tweeted.



BlockFi’s cracks are closely related to the lifeline it received in July, when FTX agreed to support the lender with a $400 million credit facility as rival lenders Celsius and Voyager were entering bankruptcy.&nbsp;



The bailout, now seen as part of a <a href="https://www.reuters.com/technology/exclusive-behind-ftxs-fall-battling-billionaires-failed-bid-save-crypto-2022-11-10/">string of bad FTX deals</a>, came with strings attached: Bankman-Fried could acquire the firm for as little as $240 million next year, if it so desired.



It isn’t clear whether the struggling lender actually received the FTX credit facility. BlockFi didn’t return Blockworks’ request for comment by press time.



<figure class="wp-block-embed is-type-rich is-provider-twitter wp-block-embed-twitter"><div class="wp-block-embed__wrapper">
<blockquote class="twitter-tweet" data-width="550" data-dnt="true"><a href="https://t.co/zNF1uP6evl">pic.twitter.com/zNF1uP6evl</a>&mdash; BlockFi (@BlockFi) <a href="https://twitter.com/BlockFi/status/1590875997351866368?ref_src=twsrc%5Etfw">November 11, 2022</a></blockquote><script async src="https://platform.twitter.com/widgets.js" charset="utf-8"></script>
</div></figure>



Blockworks <a href="https://cms.blockworks.co/news/how-blockfi-went-from-tech-unicorn-to-crypto-burnout/" target="_blank" rel="noreferrer noopener">recently spoke to company insiders</a> who detailed a slew of problems at the lender, including a mentality focused on expanding customer deposits that ultimately double as liabilities.&nbsp;



As those deposits were withdrawn following SEC lawsuits and diminished trust in light of Celsius and Voyager’s demise, BlockFi revenues and balance sheets suffered. Company documents obtained showed monthly revenue fell 70% from $48 million at the start of the year to roughly $15 million by July and August.



When BlockFi failed to find much-needed funding elsewhere, Bankman-Fried played the role of crypto rescuer. The fallen crypto mogul had said his firm sought responsible players with sustainable business models that could use short-term liquidity.&nbsp;



Jack Saracco, co-founder of digital bank Ping, said the interconnectedness of the industry means the broader effects of FTX’s collapse are yet to be worked out.



“There’s so much exposure across the industry to FTX that we just don’t know about, in addition to the exposure that we do know about,” he told Blockworks, adding that BlockFi’s reliance on an FTX bailout that likely won’t happen is part of it.



Saracco noted that broader crypto adoption that has now been set back and expressed frustration that &#8220;we don’t know who owns what in this insolvency mess.”



<h3 class="wp-block-heading">BlockFi not the only company meant to be saved by FTX</h3>



<a href="https://cms.blockworks.co/news/crypto-vcs-sequoia-multicoin-reckon-with-failing-ftx-investments/" target="_blank" rel="noreferrer noopener">Sequoia, Multicoin Capital,</a> Temasek and Paradigm are among venture capital firms that stand to lose millions from their investment in FTX. Other investors should brace for more turbulence ahead.



But Voyager, another crypto lender, was also relying on FTX to save face. In September, FTX.US won an auction to buy assets of bankrupt crypto lender Voyager for $1.4 billion. That deal was set to make Voyager’s customers whole, but the bankrupt firm&#8217;s unsecured creditors committee on Thursday <a href="https://twitter.com/VoyagerUCC/status/1590775946105135104" target="_blank" rel="noreferrer noopener">confirmed</a> the transaction never went through.



Alameda Research, the trading firm founded by Bankman-Fried, in June pledged to lend $500 million to Voyager. At the time, many in the industry saw the string of bailouts as a positive move.



Fast forward to November and FTX is facing a shortfall worth $8 billion, a figure which apparently includes swathes of user funds. FTX is now critically stuck and is unlikely to help others, especially considering it can’t save itself. The Bahamas Securities regulator on Thursday <a href="https://cms.blockworks.co/news/bahamas-regulator-freezes-ftx-assets/" target="_blank" rel="noreferrer noopener">froze the assets</a> of Bankman-Fried’s Bahamian subsidiary and moved to appoint a liquidator for the entity.



A <a href="https://ftx.us/home" target="_blank" rel="noreferrer noopener">message</a> by FTX’s American affiliate, which Bankman-Fried had <a href="https://twitter.com/SBF_FTX/status/1590709195892195329" target="_blank" rel="noreferrer noopener">claimed</a> would be unaffected by the mess, now says trading may be halted on the platform in a few days. “Please close down any positions you want to close down. Withdrawals are and will remain open,” it said in a statement.



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BlockFi Stops Withdrawals, Hinting FTX Mess Can Only Get Worse

David Canellis

How BlockFi Went From Tech Unicorn to Crypto Burnout

<div id="highlights-block_62d6c81ad5262" class="highlights">
 <ul>
 <li>BlockFi already laid off 20% of its staff in mid-June</li>
 <li>CEO Zac Prince recently said the lender shouldn’t be compared to lenders that shut down</li>
 </ul>
 
</div>



Less than three weeks after <a href="https://cms.blockworks.co/ftx-reaches-deal-to-acquire-blockfi-for-up-to-240m/" target="_blank" rel="noreferrer noopener">FTX struck a deal</a> to acquire BlockFi and provide it with a $400 million loan, the cryptocurrency lender wants some employees to leave voluntarily.



The Hoboken, New Jersey-based firm is giving employees the option to resign in exchange for 10 weeks of paid leave and 10 weeks of health insurance, <a href="https://decrypt.co/105379/blockfi-employee-buyouts-one-month-after-cutting-staff" target="_blank" rel="noreferrer noopener">Decrypt reported</a> on Tuesday, citing a BlockFi employee. 



Staff members have reportedly been told they will be eligible for unemployment if they accept the offer. It isn’t clear how many employees will be offered the buyout.



A BlockFi spokesperson said the company initiated a “voluntary separation program to right-size our organization for the current market environment.”



“This is not an action we took lightly and want to ensure that employees have resources to consider the decision that is right for them,” the spokesperson told Blockworks via email. “BlockFi continues to be fully operational and all client funds are safeguarded.”



The company publicly announced in mid-June it would <a href="https://cms.blockworks.co/cryptocurrency-lender-blockfi-set-to-cut-staff-by-a-fifth/" target="_blank" rel="noreferrer noopener">cut 20% of its staff</a>. CEO Zac Prince said at the time that a “dramatic shift” in macroeconomic conditions had negatively impacted its growth rate. Shortly after, Blockworks learned the firm <a href="https://cms.blockworks.co/blockfi-parts-ways-with-head-of-us-trading/" target="_blank" rel="noreferrer noopener">parted ways</a> with its head of US trading, Jason Wilkinson.



Unlike rival lenders such as Celsius and Babel Finance, BlockFi managed to avoid withdrawal freezes on its platform. The firm also admitted to an $80 million loss tied to its exposure to crypto hedge fund <a href="https://cms.blockworks.co/tag/three-arrows-capital/" target="_blank" rel="noreferrer noopener">Three Arrows Capital</a>, but it said this is a fraction compared to losses reported by other lenders. 



Notably, BlockFi was propped up by <a href="https://cms.blockworks.co/tag/ftx/" target="_blank" rel="noreferrer noopener">FTX</a> which initially agreed to support the firm with a <a href="https://cms.blockworks.co/blockfi-inks-250m-credit-deal-with-ftx-to-ease-liquidity-fears/" target="_blank" rel="noreferrer noopener">$250 million</a> revolving line of credit before reaching an agreement to purchase it entirely.



Concerns were also raised about positions BlockFi might have in the Grayscale Bitcoin Trust, which is down nearly 60% year to date. But Prince confirmed the firm itself <a href="https://cms.blockworks.co/blockfi-winds-down-loans-backed-by-gbtc-stock-ceo-says/" target="_blank" rel="noreferrer noopener">has no exposure</a> to the fund and is unwinding loans in which shares are held as collateral.



He recently said on Twitter that BlockFi shouldn’t be compared to its competitors that shut down and have impending losses.&nbsp;



<figure class="wp-block-embed is-type-rich is-provider-twitter wp-block-embed-twitter"><div class="wp-block-embed__wrapper">
<blockquote class="twitter-tweet" data-width="550" data-dnt="true">2/2 BlockFi is fully functional across all products (credit card, loans, trading, earning interest), no client losses, raised interest rates in July And we have exciting stuff in the pipeline 😎&mdash; Zac Prince (@BlockFiZac) <a href="https://twitter.com/BlockFiZac/status/1546492678698844163?ref_src=twsrc%5Etfw">July 11, 2022</a></blockquote><script async src="https://platform.twitter.com/widgets.js" charset="utf-8"></script>
</div></figure>



Several employees at cryptocurrency firms including <a href="https://cms.blockworks.co/coinbase-cut-workforce-ceo-wary-of-potential-recession/" target="_blank" rel="noreferrer noopener">Coinbase</a>, <a href="https://cms.blockworks.co/gemini-exchange-cuts-workforce-for-second-time-in-2-months-report/" target="_blank" rel="noreferrer noopener">Gemini</a> and <a href="https://cms.blockworks.co/crypto-com-cutting-5-of-workforce-amid-digital-asset-downturn/" target="_blank" rel="noreferrer noopener">Crypto.com</a> have lost jobs in the last two months, but it now appears a cost-cutting phase for the industry yet may not yet be over.



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BlockFi Initiates ‘Voluntary Separation Program’ To Further Trim Headcount

Bessie Liu

<div id="highlights-block_62bf5e534a7dd" class="highlights">
 <ul>
 <li>Bankman-Fried says he is “way more excited to bail out customers than shareholders”</li>
 <li>FTX’s acquisition of BlockFi may lead to potential layoffs</li>
 </ul>
 
</div>



FTX on Thursday closed an anticipated deal with BlockFi to acquire the troubled crypto lender for up to $240 million, depending on the startup’s performance triggers.



The agreement also involves a $400 million revolving line of credit, good for a total price tag of $620 million.&nbsp;



<figure class="wp-block-embed is-type-rich is-provider-twitter wp-block-embed-twitter"><div class="wp-block-embed__wrapper">
<blockquote class="twitter-tweet" data-width="550" data-dnt="true">Yesterday we signed definitive agreements, subject to shareholder approval, with FTX US for: 1. A $400M revolving credit facility which is subordinate to all client funds, and 2. An option to acquire BlockFi at a variable price of up to $240M based on performance triggers.&mdash; Zac Prince (@BlockFiZac) <a href="https://twitter.com/BlockFiZac/status/1542934040092856321?ref_src=twsrc%5Etfw">July 1, 2022</a></blockquote><script async src="https://platform.twitter.com/widgets.js" charset="utf-8"></script>
</div></figure>



Blockworks <a href="https://cms.blockworks.co/crypto-exchange-ftx-to-acquire-beleaguered-lender-blockfi/" target="_blank" rel="noreferrer noopener">reported</a> the acquisition will likely lead to additional BlockFi layoffs, as FTX is predominantly vying for the lending startup’s technology, investors and counterparties. The prospect of immediate job losses were later <a href="https://twitter.com/BlockFiZac/status/1542934076927213568" target="_blank" rel="noreferrer noopener">denied</a> by BlockFi CEO Zac Prince and <a href="https://twitter.com/SBF_FTX/status/1542619084663263233" target="_blank" rel="noreferrer noopener">FTX CEO Sam</a> <a href="https://twitter.com/SBF_FTX/status/1542619084663263233" target="_blank" rel="noreferrer noopener">Bankman-Fried</a>.



Although Prince did not disclose the lower end of the acquisition, CNBC reported the deal was pegged at <a href="https://www.cnbc.com/2022/06/30/ftx-closes-in-on-a-deal-to-buy-embattled-crypto-lender-blockfi-for-25-million-in-a-fire-sale.html" target="_blank" rel="noreferrer noopener">$25 million</a>. Prince denied CNBC’s reporting, which he dubbed unfounded.&nbsp;



Market volatility following the downfall of Celsius and Three Arrows Capital (3AC) put cryptocurrency lenders in a difficult position.



“While we were one of the first to fully accelerate our overcollateralized loan to 3AC, as well as liquidate and hedge all collateral, we did experience ~$80M in losses, which is a fraction of losses reported by others,” Prince tweeted.



JPMorgan <a href="https://cms.blockworks.co/crypto-deleveraging-cycle-wont-last-much-longer/" target="_blank" rel="noreferrer noopener">researchers predict</a> that deleveraging is already advanced, and — with the assistance of deep-pocketed crypto firms stepping in to ease the contagion — debt-related mayhem may soon come to an end.



“We are trying to find who were the responsible players who were building out a good business, had a sustainable model and could use short term liquidity that could help protect customer funds,” Bankman-Fried told BloombergTV.



Added Bankman-Fried: The firm is “way more excited to bail out customers than shareholders.”



In fact, if BlockFi’s valuation was to rise above $240 million, shareholders would be unable to refuse BlockFi’s acquisition.&nbsp;



<figure class="wp-block-embed is-type-rich is-provider-twitter wp-block-embed-twitter"><div class="wp-block-embed__wrapper">
<blockquote class="twitter-tweet" data-width="550" data-dnt="true">Let&#39;s unpick this. It consists of two elements: &#8211; a call warrant with a variable strike price conditional on unspecified performance triggers &#8211; a subordinated credit facility. Both are bad news for ordinary shareholders. <a href="https://t.co/00fIUAaBRK">https://t.co/00fIUAaBRK</a>&mdash; Cassandra Schadenfreude (@Frances_Coppola) <a href="https://twitter.com/Frances_Coppola/status/1542955153971728384?ref_src=twsrc%5Etfw">July 1, 2022</a></blockquote><script async src="https://platform.twitter.com/widgets.js" charset="utf-8"></script>
</div></figure>



“The focus of this is not how much we can deliver shareholder value,” Bankman-Fried said. “It’s how do we protect customers, and I think those imply pretty different things.”



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FTX Reaches Deal To Acquire BlockFi for up to $240M

Ben Strack

Macauley Peterson

<div id="highlights-block_62b208156a41c" class="highlights">
 <ul>
 <li>The proceeds of the credit facility are intended to be contractually subordinate to all client balances, according to BlockFi CEO Zac Prince</li>
 <li>FTX-associated Alameda Research previously provided $500 million in funding to Voyager</li>
 </ul>
 
</div>



Crypto exchange FTX continues to stay busy amid the crypto market downturn, revealing on Tuesday that it has agreed to support BlockFi with a $250 million revolving line of credit.&nbsp;



FTX CEO Sam Bankman-Fried said in a <a href="https://twitter.com/SBF_FTX/status/1539268638791696385" target="_blank" rel="noreferrer noopener">Tuesday tweet</a> that his company takes seriously its duty to protect the digital asset ecosystem and its customers.



The partnership with BlockFi follows Alameda Research, a trading firm founded by Bankman-Fried, <a href="https://cms.blockworks.co/voyager-to-borrow-500m-from-alameda-amid-insolvency-rumors/" target="_blank" rel="noreferrer noopener">lending crypto broker Voyager Digital $500 million</a>. The capital gives the firm more flexibility to mitigate current market conditions, Voyager CEO Stephen Ehrlich said in a statement.



FTX also agreed to <a href="https://cms.blockworks.co/bankman-fried-belies-bear-bids-for-bitvo/" target="_blank" rel="noreferrer noopener">acquire</a> Canadian crypto trading firm Bitvo last week. Bankman-Fried <a href="https://cms.blockworks.co/ftxs-sam-bankman-fried-spots-opportunity-in-troubled-markets/" target="_blank" rel="noreferrer noopener">told Blockworks</a> in April that difficult market conditions could trigger a wave of mergers and acquisitions, and that it “wouldn’t be totally shocking” for the company to acquire some shrinking exchanges.



The proceeds of the credit facility are intended to be contractually subordinate to client balances across all BlockFi account types and will be used to bolster BlockFi&#8217;s balance sheet.



BlockFi CEO Zac Prince said in a statement that the deal will help ensure client funds are safeguarded, noting that it also unlocks future collaboration and innovation between the firm and FTX.



Prince <a href="https://www.bloomberg.com/news/articles/2022-06-21/blockfi-ceo-prince-on-credit-pact-with-ftx-crypto-plunge-q-a#xj4y7vzkg" target="_blank" rel="noreferrer noopener">told Bloomberg</a> that BlockFi received a higher volume of withdrawal requests last week, but noted the trend is returning to normal.



The capital injection comes as the industry grapples with recent cryptocurrency price plunges.



Prince <a href="https://cms.blockworks.co/cryptocurrency-lender-blockfi-set-to-cut-staff-by-a-fifth/" target="_blank" rel="noreferrer noopener">revealed on Twitter last week</a> that the company would be reducing staff by around 20%, noting that “the dramatic shift in macroeconomic conditions” had hurt BlockFi’s growth rate.&nbsp;



The <a href="https://cms.blockworks.co/wheres-the-liquidity-crypto-lending-explained/">crypto lender</a> also <a href="https://cms.blockworks.co/blockfi-says-it-liquidated-a-large-client-amid-3acs-margin-calls/" target="_blank" rel="noreferrer noopener">confirmed on Thursday</a> it liquidated an unnamed “large client” that failed to meet its obligations on an overcollateralized margin loan. The Financial Times reported that crypto hedge fund Three Arrows Capital (3AC) was the counterparty involved.



“BlockFi has careful risk management and great leadership. So they successfully removed at-risk counterparties preemptively,” Bankman-Fried said in a Twitter post Tuesday. “BlockFi customer assets are appropriately managed, with no debt/risk from 3AC, Celsius, etc.”



The CEO added in the Twitter thread that FTX would partner with BlockFi to offer “industry-leading products” going forward.&nbsp;



An FTX spokesperson declined to comment further on the company’s decision to partner with BlockFi or what future collaboration with the firm could entail.



This story was updated on Jun. 22 at 6:20 am ET.



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BlockFi Inks $250M Credit Deal With FTX To Ease Liquidity Fears

<div id="highlights-block_62a7691e56ff2" class="highlights">
 <ul>
 <li>BlockFi CEO says headcount cut is in response to worsening macroeconomic conditions</li>
 <li>The digital asset service provider will give affected employees opportunities to be included in a directory</li>
 </ul>
 
</div>



Zac Prince, CEO of cryptocurrency lender BlockFi, has <a href="https://twitter.com/BlockFiZac/status/1536372338379608065?s=20&amp;t=DMcYQ_cJ6u7mfic7yDYFXA" target="_blank" rel="noreferrer noopener">announced on Twitter</a> the company will be reducing staff by around 20%.



“Like many others in tech, we’ve been impacted by the dramatic shift in macroeconomic conditions, which have had a negative impact on our growth rate. As a result, our number one goal has been to achieve profitability so that we can extend our runway and control our destiny,” Prince said on Twitter.



The lender’s move comes as crypto companies are feeling the squeeze from continued downward market pressure, joining <a href="https://cms.blockworks.co/gemini-joins-growing-list-of-crypto-exchanges-cutting-staff-amid-downturn/" target="_blank" rel="noreferrer noopener">Gemini</a>, <a href="https://cms.blockworks.co/coinbase-latest-crypto-firm-to-cut-costs-amid-market-downturn/" target="_blank" rel="noreferrer noopener">Coinbase</a> and most recently <a href="https://cms.blockworks.co/crypto-com-cutting-5-of-workforce-amid-digital-asset-downturn/" target="_blank" rel="noreferrer noopener">Crypto.com</a> in announcing hiring freezes or mass layoffs.



BlockFi has seen explosive growth, expanding from roughly 150 employees at the end of 2020 to 850 before the layoffs. In the process, it transformed from a crypto-backed lender into a full-service institutional business that provides “financing, trade execution and private client services to leading institutions globally.”



“Today is a painful day for BlockFi but more so for employees who we have to part ways with. We are doing everything in our power to treat all of our impacted colleagues with the empathy and compassion that they deserve,” a founder&#8217;s <a href="https://blockfi.com/a-message-from-our-founders" target="_blank" rel="noreferrer noopener">statement</a> said.



The New Jersey-headquartered firm will give affected employees the opportunity to include their contact information in a directory of people looking for new roles, and will actively connect them with companies that will be hiring.&nbsp;



In February, BlockFi <a href="https://cms.blockworks.co/crypto-lender-blockfi-to-pay-100m-in-fines-to-us-regulators/" target="_blank" rel="noreferrer noopener">settled</a> with the SEC for failing to register its interest-bearing crypto accounts with the regulator, for which it paid a $100 million fine.



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Cryptocurrency Lender BlockFi Set To Cut Staff by a Fifth

<div id="highlights-block_61b891eda6842" class="highlights">
 <ul>
 <li>The more than 70,000 people using the card have so far amassed roughly 235 bitcoin since its launch in July</li>
 <li>BlockFi cardholders primarily hold the assets they earn, the survey found, as 89% percent of those earning bitcoin have retained their BTC</li>
 </ul>
 
</div>



About two-thirds of BlockFi Rewards cardholders spend less with cash-back cards because they have a crypto alternative, according to a survey conducted by the firm.



The wealth management and trading firm for crypto holders <a href="https://cms.blockworks.co/blockfi-releases-visa-rewards-credit-card-to-us-clients/" target="_blank" rel="noreferrer noopener">unveiled</a> its Visa rewards credit card for a handful of its US-based clients in July. The company at the time had 400,000 people on its waitlist, which formed in December 2020.



Though there are a few competing cards that offer price exposure to crypto, BlockFi&#8217;s offering is the only credit card that allows cardholders to keep the crypto they earn, Gaurav Gollerkeri, General Manager of Payments at BlockFi.



<a href="https://blockfi.com/credit-card/" target="_blank" rel="noreferrer noopener">The card</a> offers 1.5% back in bitcoin on all purchases. The more than 70,000 people using the card have so far amassed roughly 235 bitcoins (about $11.2 million at Tuesday&#8217;s price), according to the company.&nbsp;



BlockFi <a href="https://cms.blockworks.co/average-blockfi-credit-card-holder-on-track-to-spend-30k-per-year/" target="_blank" rel="noreferrer noopener">announced</a> three months after the launch that the average BlockFi cardholder was on track to spend $30,000 per year.&nbsp;



&#8220;We believe everyone should be able to get involved in the crypto community, and we want to lower the barrier to entry,&#8221; Gollerkeri told Blockworks.



The survey, conducted in mid-November and released Tuesday, found that about half of the nearly 1,000 respondents use the BlockFi Rewards Credit Card for at least 75% of their total card purchases.



<blockquote class="wp-block-quote is-layout-flow wp-block-quote-is-layout-flow">“Our users see the way the financial world is moving and are overwhelmingly switching their spending to crypto rewards cards and opting to save their crypto rewards for long-term gains as they grow their wealth,” Zac Prince, co-founder &amp; CEO of BlockFi, said in a statement.</blockquote>



BlockFi <a href="https://blockfi.com/earn-the-way-you-want-with-rewards-flex-for-the-blockfi-rewards-credit-card" target="_blank" rel="noreferrer noopener">introduced its Rewards Flex feature</a> last month, which allows cardholders the option to earn their rewards in other crypto assets, such as ether (ETH), litecoin (LTC), chainlink (LINK), pax gold (PAXG), basic attention coin (BAT) or uniswap (UNI).



A majority of cardholders appear to prefer bitcoin rewards, as only about 5% of cardholders opted to receive their rewards in a crypto asset other than bitcoin after the feature’s release, according to BlockFi.



The BlockFi cardholders primarily hold the assets they earn, the survey also found. Eighty-nine percent of them retained their bitcoin and haven’t traded out of it for another type of crypto asset since starting their accounts.



BlockFi is working to deliver enhanced rewards at select merchants to enable clients to earn even more crypto, Gollerkeri said. 



&#8220;We will be enabling clients to pay their credit card bill using stablecoins, which increases the utility of stablecoins held on our platform,&#8221; he added. &#8220;We also want to add more traditional credit card features such as adding authorized users, so that clients can earn even more rewards while helping family members build their credit history.&#8221;



The survey follows on another recently administered by BlockFi that found that <a href="https://cms.blockworks.co/blockfi-survey-finds-one-in-10-americans-are-gifting-crypto-for-the-holidays/" target="_blank" rel="noreferrer noopener">one in 10 Americans are gifting crypto</a> for the holidays. Bitcoin was by far the crypto of choice for gifting and receiving, with respondents labeling dogecoin and ether as their second and third choices, respectively.



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