The move comes as BlockFi is facing increasing legal pressure over its interest-bearing cryptocurrency accounts, which were the company’s flagship product.
Christopher Giancarlo, the former chief of the United States Commodity Futures Trading Commission, has resigned from the board of directors of BlockFi after only four months on the board, CoinDesk has discovered.
It was not immediately obvious why Giancarlo was stepping down from the board of directors of the cryptocurrency lender. In spite of repeated attempts for comment, he did not react.
Soon after CoinDesk reached out to BlockFi for comment on this story, the company published a press release announcing that Giancarlo has been replaced by Ellen-Blair Chube. The statement from BlockFi stated that Giancarlo “will continue to provide strategic advice to the firm in an advisory role.”
The co-founder of the Digital Dollar Project, nicknamed as “Crypto Dad” during his stint as chairman of the United States Commodity Futures Trading Commission (CFTC), served as the first independent director on the BlockFi board of directors. His abrupt departure comes at a key time in BlockFi’s development.
In the meantime, the company is defending itself against a legal attack, getting back on track after a shaky $500 million investment round, and planning for a public market debut that BlockFi’s Series E investors were assured might happen as early as 2022.
The legal concerns that have arisen in connection with BlockFi’s interest-bearing crypto accounts are most likely the company’s most significant problem. Multiple states, including BlockFi’s home state of New Jersey, asserted in July that the business’s flagship BlockFi Interest Accounts (BIA) were unregistered securities, according to the company.
If BlockFi is unable to resolve the New Jersey case, the company has warned users that it may be compelled to cease onboarding new interest accounts “worldwide” as a result. On September 30, a cease-and-desist order that has been three times postponed will finally take effect.
BlockFi was thrown into crisis mode as a result of a barrage of negative headlines, which came just as the company was closing a massive investment round valued at roughly $5 billion. According to venture capital writer Eric Newcomer, the lead investor, Third Point LLC, withdrew from the deal shortly after.
One month later, the independent director has decided to leave the company as well.
The fact that Giancarlo had previously worked as a regulator was a likely positive for BlockFi, according to Semadeni, who said that corporations sometimes hire independent members who “lend legitimacy to the board.”
Giancarlo’s April arrival instilled a sense of authority in the boardroom: because he did not hold any BlockFi stock, he was the lone independent voice among corporate insiders and investors.
BlockFi touted Giancarlo’s appointment at the time as part of a board enlargement intended to ensure that the company had a “public-market prepared governance structure.”
BlockFi is wagering that Chube, a managing director at William Blair, will be more willing to stick around now that Giancarlo has departed.
“It’s like somebody putting an offer on a home,” Semadeni said of Giancarlo’s brief tenure, “doing the inspection, taking a look at the inspection and saying, ‘Yeah, I’ll pass on the house.’”