BlockFi Had $600M In Crypto Loans That Were’t Covered By Collateral

BlockFi Had $600M in crypto loans that were not covered by collateral and it loaned out $1.8 billion according to their numbers so let’s have a closer look at today’s latest cryptocurrency news.

The crypto lending platform Blockfi had $600M in loan exposure by the end of June as per the transparency report recently released. The report shows that Blockfi held an institutional loan portfolio with $1.8 billion and $1.2 billion in loan collateral. The company defined the net exposure to a loan counterparty as the fair value of loans to the counterparty minus the fair value of the collateral posted by the counterpart which means over half a billion dollars that were loaned out, were not covered by collateral.

Collateral refers to assets that are posted by borrowers to lenders as security against the borrower’s default and if the borrower is not able to repay the debt, Blockfi might liquidate the collateral and assume permanent ownership of the funds. BlockFi liquidated the bankrupt hedge fund Three Arrows Capital a month ago with BlockFi CEO Claiming that no customer funds were impacted:

“We require many, but not all, borrowers to post varying levels of collateral depending on the borrower’s credit profile.”

Blockfi reported that the value of stablecoins and the digital assets stored in the client’s wallet accounts were about half a million. The wallet accounts were non-interest-bearing custodial accounts from when blockFi didn’t deploy the assets for revenue-generating activities but now, the company owns another $2.6 billion in digital assets that were borrowed from customers via its Blockfi interest account and the Personalized Yield program. The assets are also used for BlockFi lending activities for retail and institutional clients but to also facilitate trading on their behalf.

The platform’s deployable assets consist of BIA, BPY, and the customers’ loan collateral which totals $3.9 billion. At Blockfi, the loan collateral is used for lending, investing, and rehypothecation without the company having to retain amounts of digital assets. BlockFi accepted a revolving credit facility from FTX to keep itself afloat as the bear market set in and Prince even tried to distance himself and the company from the troubled crypto lenders like Celsius and Voyager.