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Zac Prince – former CEO of collapsed crypto lending firm BlockFi – took the stand during Sam Bankman-Fried’s trial in New York City on Friday.
The CEO discussed the size of his loans to the exchange’s sister trading desk, Alameda Research, and what exactly he knew about the state of their balance sheet as one of its major creditors.
How BlockFi Went Bust
Per testimony summarized by Inner City Press, Prince said BlockFi lent out “five to ten billion dollars” overall, of which $50 million initially went to Alameda. Between May 2021 and May 2022, he said that amount increased from $50 million to $1.1 billion.
After that, disaster struck: the LUNA ecosystem imploded, Three Arrows Capital defaulted to the company, and rival firms Celsius and Voyager froze their platforms. This led to BlockFi arranging a $400 million credit facility with FTX at the time, as well as making arrangements for a potential full buyout from the exchange.
Despite its troubles, BlockFi extended another $850 million loan to Alameda between July 2022 and November 2022, shortly after the firm had repaid its initial loan to BlockFi upon recall. Prince said they’d seen a version of Alameda’s balance sheet beforehand detailing their loans from “other lenders,” but that his company didn’t realize they’d had loans from FTX.
“They would have been insolvent,” he said, noting that he wouldn’t have lent money to the company if they knew such loans existed, nor if they knew Alameda was using FTX customer funds.
Loans to Sam Bankman-Fried, he said, would have also had BlockFi concerned. When FTT’s price dropped in November, BlockFi tried to recall its loan again, but only got a slice of its money back.
BlockFi also has another $350 million sitting directly on FTX’s exchange. Prince ultimately blamed both firms for causing his company’s bankruptcy.
Was BlockFi’s CEO Really Innocent?
During her examination, ex-Alameda chief Caroline Ellison admitted that she had lied about her company’s financial status to other large creditors, such as Genesis.
However, BlockFi’s creditors have alleged that Zac Prince knew about Alameda’s disastrous balance sheet as early as 2021, which was mostly comprised of illiquid FTT tokens. Many loans provided to Alameda were collateralized by said token.
“Prince dismissed the concerns, urging the risk team to learn to ‘get comfortable [with Alameda] being a Three Arrows-size borrower, just with FTT and other collateral types instead of GBTC shares,” wrote BlockFi’s Committee of Unsecured Creditors in a May court filing.
During court testimony, Prince claimed BlockFi’s loans after July 2022 were collateralized by shares of Grayscale’s Bitcoin Trust (GBTC) and Robinhood.