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Zac Prince \u2013 former CEO of collapsed crypto lending firm BlockFi \u2013 took the stand during Sam Bankman-Fried\u2019s trial in New York City on Friday.<\/p>\n
The CEO discussed the size of his loans to the exchange\u2019s sister trading desk, Alameda Research, and what exactly he knew about the state of their balance sheet as one of its major creditors.<\/p>\n
Per testimony summarized<\/a> by Inner City Press, Prince said BlockFi lent out \u201cfive to ten billion dollars\u201d 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.<\/p>\n After that, disaster struck: the LUNA ecosystem imploded<\/a>, 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.<\/p>\n 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\u2019d seen a version of Alameda\u2019s balance sheet beforehand detailing their loans from \u201cother lenders,\u201d but that his company didn\u2019t realize they\u2019d had loans from FTX.<\/p>\n \u201cThey would have been insolvent,\u201d he said, noting that he wouldn\u2019t have lent money to the company if they knew such loans existed, nor if they knew Alameda was using FTX customer funds.<\/p>\n Loans to Sam Bankman-Fried, he said, would have also had BlockFi concerned. When FTT\u2019s price dropped in November, BlockFi tried to recall its loan again, but only got a slice of its money back.<\/p>\n BlockFi also has another $350 million sitting directly on FTX\u2019s exchange. Prince ultimately blamed both firms for causing his company\u2019s bankruptcy.<\/p>\n During her examination, ex-Alameda chief Caroline Ellison admitted that she had lied about her company\u2019s financial status to other large creditors, such as Genesis.<\/p>\n However, BlockFi\u2019s creditors have alleged<\/a> that Zac Prince knew about Alameda\u2019s 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.<\/p>\n \u201cPrince dismissed the concerns, urging the risk team to learn to \u2018get comfortable [with Alameda] being a Three Arrows-size borrower, just with FTT and other collateral types instead of GBTC shares,\u201d wrote BlockFi\u2019s Committee of Unsecured Creditors in a May court filing<\/a>.<\/p>\n During court testimony, Prince claimed BlockFi\u2019s loans after July 2022 were collateralized by shares of Grayscale\u2019s Bitcoin Trust (GBTC) and Robinhood.<\/p>\nWas BlockFi\u2019s CEO Really Innocent?<\/h2>\n
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