Bankrupt crypto lender BlockFi reveals $227M exposure to Silicon Valley Bank

  • Bankrupt crypto lender BlockFi has revealed a $227 million exposure to Silicon Valley Bank.
  • BlockFi’s deposits are not insured by the FDIC since they were invested in a money mutual market fund.

Bankrupt crypto lender BlockFi has made headlines with its latest bankruptcy filing, revealing that it has $227 million invested in a money market mutual fund offered by Silicon Valley Bank (SVB).

This news comes in the wake of SVB’s recent closure by the California Department of Financial Protection and Innovation (DFPI) on account of its inadequate liquidity and insolvency. 

As one of the largest banks in the U.S. and a key partner to venture-backed companies, SVB’s closure has led to concerns among investors, especially in the crypto community.

This has been compounded by the recent Silvergate bankruptcy, which has caused significant turmoil in the crypto markets.

BlockFi’s deposits are not insured by the FDIC

According to a court filing made by BlockFi on 10 March, the crypto lender’s investment in the money market mutual fund offered by Silicon Valley Bank is not insured by the U.S. Federal Deposit Insurance Corporation (FDIC), not guaranteed by the bank, and not insured by any federal government agency.

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This is an important point to note, as the FDIC’s federal deposit insurance covers up to $250,000 per depositor, but it does not cover the scope of money market funds.

Money market mutual funds invest in highly liquid near-term instruments such as cash, cash equivalents, and high-quality short-term debt instruments.

These funds are regulated by the U.S. Securities and Exchange Commission, and investors are issued fund shares in exchange for their capital. Therefore, while BlockFi’s funds may not be at risk due to SVB’s troubles, the risk is most likely related to the performance of the fund.

While crypto entities like Binance and Tether have confirmed that they have no exposure to the troubled bank, firms like USD Coin issuer Circle have not been so fortunate.

Circle Internet Financial confirmed earlier on 11 March that $3.3 billion of its USDC reserves were stuck in Silver Valley Bank. Ava Labs President John Wu has also stated that his firm relied on SVB’s banking services. 

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