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Defunct crypto lender BlockFi has $227 million worth of uninsured funds allocated to a money market mutual fund (MMMF) offered by Silicon Valley Bank (SVB). However, SVB was shut down by the California state agency, the Department of Financial Protection and Innovation (DFPI) on March 10, providing no explanation at the time. This leaves BlockFi’s funds in limbo as SVB is unable to access or distribute the funds until it resolves its issues with the DFPI.
SVB is one of the US’s largest banks, and a key partner to venture-backed companies, making the reasons for the shut down all the more concerning. The MMF offered by SVB is designed to provide users with easy and low-risk access to cash equivalents. However, the uninsured nature of the fund, and now the issue of the bank shut down, has put these users’ funds at risk.
BlockFi’s current financial situation is also worth noting. The company recently received a notice from the New Jersey Bureau of Securities for purportedly selling unregistered securities, which the firm denies. The notice came shortly after the firm announced a funding round in which it raised approximately $350 million. The company has made clear that this funding should cover any regulatory fees imposed by various state-level securities regulators.
The cryptocurrency industry is rife with risk and uncertainty, and as such it is essential to have confidence in the partnerships with which funds are held. With the silence surrounding the closure of SVB, it is unclear how long BlockFi’s funds will remain frozen. However, with the notice from the New Jersey Bureau of Securities, BlockFi may be required to pay up to $250 million in fines and penalties, which would significantly impact its operations.
In summary, BlockFi’s $227 million worth of funds are currently locked in a money market mutual fund offered by Silicon Valley Bank, which has been shut down by a state agency with no explanation. This leaves BlockFi’s funds in limbo, and questions surrounding the bank’s closure add further uncertainty. However, with the notice from the New Jersey Bureau of Securities, BlockFi may face significant regulatory fees, which would impact its operations. Overall, this highlights the need for transparency and caution when dealing with cryptocurrency partnerships.
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