Creditors of cryptocurrency lender BlockFi have accused the company of misleading investors, cutting corners, and taking a big risk on FTX even after seeing a secret balance sheet that revealed fundamental flaws in Sam Bankman-Fried’s empire. In a court filing unsealed Friday, the company’s Committee of Unsecured Creditors argued that BlockFi’s mismanagement and overexposure to FTX exposed the company and its creditors to losses of a staggering quantum, which were foreseeable and foreseen.
The creditors’ report stated that BlockFi had seen the same balance sheet published by CoinDesk before investing in FTX and Alameda, and that the company had failed to complete basic due diligence. They also accused BlockFi of misleading investors about its risk management strategies, asset concentration, and honoring of customer withdrawals.
BlockFi had the exact same balance sheet published by CoinDesk….before it placed any of the cryptocurrency placed on the FTX/Alameda platform in the second half of 2022, the Friday filing by creditors said. BlockFi failed to complete basic due diligence on Bankman-Fried’s empire, offering “special treatment for FTT and Alameda… that cast risk management principles entirely to the wind.
In response, BlockFi told journalists it disagrees with the Committee’s report, citing its own July 10 filing which said that none of BlockFi management had misused client funds for their own purposes.
The creditors are now arguing that the company should be liquidated right away without further costly legal delays, and without freeing executives from future litigation risks.