Crypto lender BlockFi has $227 million in “unprotected” funds in Silicon Valley Bank, according to a bankruptcy document, and may be in violation of U.S. bankruptcy law.
The bank was shut down by a California regulator on Friday morning after investors, spooked by the bank's moves to shore up its balance sheet, began withdrawing funds.
That $227 million is also not insured by the Federal Deposit Insurance Corporation since it is in a money market mutual fund, the U.S. Trustee overseeing BlockFi's Chapter 11 bankruptcy case said in the filing. The standard deposit insurance amount is $250,000 per depositor, per insured bank for each account ownership category, according to the FDIC’s website.
A balance summary statement provided by the bank for that account said, “money market mutual fund investments are: not a deposit, not FDIC insured, not insured by any federal government agency, not guaranteed by the bank, may lose value.”
Earlier this year, the U.S. Trustee said it warned BlockFi that it may be out of compliance. BlockFi said it would provide proof of compliance, which the U.S. Trustee said it had not by the time the FDIC seized control of SVB.
BlockFi filed for bankruptcy protection in November. It has creditors such as FTX US and the Securities and Exchange Commission.
Madhu Unnikrishnan contributed reporting.
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