The Block: Silvergate Bank to release nearly $9.9 million to BlockFi

A bankruptcy judge has ordered Silvergate Bank to release nearly $9.9 million to crypto lender BlockFi, days after the bank said it was “reevaluating its business” and could be "l ess than well-capitalized," which led to a swarm of companies severing ties with the bank.

U.S. Bankruptcy Judge Michael B. Kaplan said Silvergate had to return $9,850,000 deposited by BlockFi, according to a court filing on Friday.

BlockFi filed for bankruptcy protection in November 2022. Soon after filing, BlockFi began negotiating with Silvergate for the release of $10 million in a reserve account held at the bank, and it reached an agreement on Friday for the bank to release a majority of those funds within two business days.

Silvergate has faced its own issues this week. In addition to capitalization problems, the La Jolla, Calif.-based bank said in a Securities and Exchange Commission filing on Wednesday that it faces, " various litigation (including private litigation) and regulatory and other inquiries and investigations against or with respect to the Company, investigations from our banking regulators, congressional inquiries and investigations from the U.S. Department of Justice."

That's led to a raft of customer departures from the bank that built itself a position in the center of much of the U.S. crypto industry. Customers began dropping the next day, including Coinbase, Circle, Paxos and Gemini, some citing their moves were made out of an “abundance of caution.”

© 2023 The Block Crypto, Inc. All Rights Reserved. This article is provided for informational purposes only. It is not offered or intended to be used as legal, tax, investment, financial, or other advice.