The trial against co-founder of FTX Sam Bankman-Fried took an intriguing turn when Zac Prince, the CEO of defunct cryptocurrency lender BlockFi, testified in a federal courtroom in Manhattan.
Prince’s appearance provided valuable insight into the complicated relationship between BlockFi, FTX and Alameda investigation.
BlockFi’s bankruptcy is rooted in Alameda and FTX
According to a Bloomberg reportPrince revealed that BlockFi had significant exposure to Alameda and FTX, estimated at approximately $1 billion, at the time of BlockFi’s failure in November 2022.
Prince claimed that if the loans to Alameda were still in good standing and the funds were available on FTX, BlockFi would not have filed for bankruptcy. This statement suggests that BlockFi’s financial problems were closely linked to the collapse of Alameda and FTX.
Prince’s testimony differed significantly Caroline Ellisonthe government’s star witness, who portrayed Bankman-Fried as the mastermind behind a fraudulent scheme that used FTX customer funds for speculative trading at Alameda.
Prince’s account positioned BlockFi as a victim of Bankman-Fried’s alleged schemes, alleging that BlockFi made loans to Alameda based on misleading balance sheets.
Defense attorneys sought to emphasize that BlockFi willingly made the loans to Alameda, knowing the risks involved.
Creditors accuse BlockFi of insufficient due diligence
Prince discussed BlockFi’s due diligence process regarding Alameda’s collateral, consisting of tokens affiliated with FTX. During Prince’s explanation, the judge asked for clearer conditions, which gave rise to an analogy with car loans.
According to the report, the plaintiff questioned the adequacy of BlockFi’s due diligence creditors accused the company for failing to recognize the warning signs before offering substantial loans to Alameda.
Prince’s testimony emphasized that providing “unaudited balance sheets” is an industry standard for borrowers seeking loans. The defense sought to establish that BlockFi was aware of the risks of lending to Alameda and acted within industry standards.
Zac Prince’s testimony in the trial of Sam Bankman-Fried provided a deeper insight into the intertwined relationships within the crypto industry. BlockFi’s exposure to Alameda and FTX and subsequent bankruptcy provided insight into the potential consequences of alleged fraudulent activity.
The different stories presented by the prosecution and defense underline the complexity of the case. As the trial progresses, the court will continue to investigate the details surrounding BlockFi’s lending practices and the extent of Bankman-Fried’s involvement in the alleged schemes.
It is important to note that BlockFi can no longer be used for crypto-related activities, as the company declared bankruptcy and suspended withdrawals in November 2022. The bankruptcy filing shows that BlockFi owes between $1 billion and $10 billion to more than 100,000 creditors.
Featured image from NBC, chart from TradingView.com