Silvergate to return $9.85M deposit to BlockFi Silvergate to return $9.85M deposit to BlockFi

Silvergate to return $9.85M deposit to BlockFi

The two companies set up a reserve agreement prior to the latter's bankruptcy.

Silvergate to return $9.85M deposit to BlockFi

Cover art/illustration via CryptoSlate. Image includes combined content which may include AI-generated content.

Silvergate Bank has been ordered to return $9.85 million to BlockFi as part of the latter firm’s ongoing bankruptcy proceedings, according to a March 3 filing.

BlockFi will see $9.85 million returned

That court filing says BlockFi and Silvergate entered an agreement in August 2020 where Silvergate acted as a depository institution to handle certain ACH transactions. In November 2021, BlockFi agreed to establish a reserve containing $10 million.

The agreement stated that the account would terminate 90 business days after the last relevant transfer, granting BlockFi unrestricted access to those funds.

As a result, Silvergate is now compelled to release $9.85 million from the reserve account. It is permitted to hold the remaining $150,000 in the reserve account.

The court order is part of BlockFi’s ongoing bankruptcy proceedings. The crypto lending firm filed for bankruptcy in November 2022. It has more than 100,000 creditors and owes between $1 billion and $10 billion to those creditors.

The relationship between BlockFi and Silvergate

After BlockFi filed for bankruptcy in November 2022, Silvergate said that it had less than $20 million of exposure to BlockFi. It also said that it was not a custodian for BlockFi’s Bitcoin-collateralized SEN Leverage loans and had no investments in BlockFi.

The two companies nevertheless maintained a close relationship. BlockFi called Silvergate a “banking partner” on Nov. 10 and said that it would halt ACH and wire processing for three days due to Silvergate’s observance of a holiday. Later that same day, BlockFi announced that it would halt withdrawals indefinitely due to FTX’s separate collapse.

This week’s court order compelling the return of funds is seemingly unrelated to a recent controversy around Silvergate. On Mar. 1, Silvergate said that it would delay its 10-K filing and alluded to various ongoing regulatory investigations.

That development led several major crypto companies to distance themselves from the crypto-friendly bank. BlockFi did not comment on Silvergate’s issues this week.

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Posted In: Bankruptcy, Lending