Silvergate Bank has been mandated to give $9.85 million back to BlockFi as part of the latter company’s continuing bankruptcy proceedings.
According to that court document, BlockFi and Silvergate signed a contract in August 2020 under which the crypto bank would operate as a depository institution for the purposes of processing specific ACH transactions.
BlockFi agreed to create a reserve with $10 million in November 2021.According to the agreement, the account would close 90 business days following the last pertinent transfer, giving BlockFi full access to the funds.
Silvergate is now required to release $9.85 million from the reserve account as a result. The balance of $150,000 may be held in the reserve account.
A element of BlockFi’s current bankruptcy procedures is the court order. In November 2022, the cryptocurrency lending business filed for bankruptcy. It has about 100,000 creditors, to whom it owes between $1 billion and $10 billion.
The connection between Silvergate and BlockFi
After BlockFi declared bankruptcy in November 2022, Silvergate claimed that its exposure to BlockFi was less than $20 million. Additionally, it declared that it had no assets in BlockFi and was not a custodian for the SEN Leverage loans made by BlockFi that were secured by Bitcoin.
The two businesses did, however, continue to be close. On November 10, BlockFi referred to Silvergate as a “banking partner” and stated that owing to Silvergate’s celebration of a holiday, ACH and wire operations will be suspended for three days.
Because to FTX’s independent collapse, BlockFi declared later that day that withdrawals will be suspended forever. The recent Silvergate scandal appears to have nothing to do with the court judgment for the return of monies issued this week.
Silvergate said on March 1 that company will postpone submitting its 10-K and made reference to a number of ongoing regulatory inquiries. Several significant crypto businesses decided to cut ties with the bank that supported them as a result of that development. This week, BlockFi made no comments regarding Silvergate’s problems.
