According to a new bankruptcy filing, defunct crypto lender BlockFi has $227 million in uninsured funds allocated to a money market mutual fund (MMMF) offered by troubled Silicon Valley Bank (SVB).
SVB, one of the largest banks in the US and a key partner of corporate-backed companies, was shut down by the California Department of Financial Protection and Innovation (DFPI) on March 10, with no details provided at time of release. closing.
The move adds to the recent carnage of Silvergate bankruptcy that has seen crypto markets tumble since the crypto-friendly bank’s financial woes came to light in early March.
Few more bank collapses and then just
— sassal.eth (@sassal0x) March 10, 2023
Looking at BlockFi’s ongoing bankruptcy case, a March 10 filing indicates that the firm has $227 million of equity in an MMMF offered by SVB.
In particular, the filing highlights a balance summary statement from SVB that states that BlockFi’s investment is not a Federal Deposit Insurance Corporation (FDIC) insured deposit, is not insured by any agency of the federal government, and is “not It is guaranteed by the bank.
FDIC federal deposit insurance covers up to $250,000 per depositor, however it does not cover the scope of money market funds.
A money market mutual fund invests in short-term, highly liquid instruments such as cash, cash equivalents, and high-quality short-term debt instruments, and is regulated by the US Securities and Exchange Commission.
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Investors are issued fund shares in exchange for their capital, and as such, BlockFi funds may not be at risk despite SVB’s woes.
Is this a regular MMF, not affiliated with SVB, held at SVB or its securities subsidiary? The SVB receivership should not affect that. The MMF is not FDIC insured, but the value of the shares would depend on what’s in the MMF, not what happens to SVB.
—Matt Waters (@mattwwaters) March 10, 2023
BLS offered several mutual fund investment services, but according to its website, it does not appear to have managed any of the funds itself. The firm lists big names like BlackRock, Morgan Stanley and Western Asset Management as fund managers.
As such, the risk to BlockFi in this case is likely to be hampered by the fund’s performance, and not anything related to SVB’s financial woes.
One company that seems to be directly affected by the closure of SVB, and the bankruptcy of Silvergate, is Circle, issuers of USD Coin (USDC).
According to the company’s latest audit report, as of January 31, $8.6 billion, or approximately 20% of its reserves, was held at various US financial institutions, including SVB, Silvergate and Bank of New York Mellon.
The exact value held at SVB and Silvergate is unclear, however Circle released a statement via Twitter on March 10 noting that the company and USDC will continue to “operate as normal” while it awaits “clarification on how the receivership of the SVB’s FDIC will affect their depositors.”
Silicon Valley Bank is one of six banking partners Circle uses to manage the ~25% portion of USDC cash reserves. While we await clarity on how the FDIC receivership of SVB will affect their depositors, Circle and USDC continue to operate as normal.https://t.co/NU82jnajjY
— Circle (@circle) March 10, 2023
At the time of writing, the USDC has fallen below the $1 parity to sit at $0.98 according to data from CoinGecko.
