Crypto Bank Silvergate Forced to Return $9.85M Deposit to BlockFi in Ongoing Bankruptcy Dispute

cryptonews.com:

Crypto-friendly bank Silvergate has been forced to return $9.85 million to BlockFi as part of the crypto lender’s ongoing bankruptcy proceedings.

According to documents made available on the website of BlockFi’s restructuring advisor, the bankruptcy court overseeing BlockFi's restructuring process ordered Silvergate to immediately release $9.85 million to the now-defunct crypto lender on Friday. 

The order comes as BlockFi and Silvergate entered an agreement in August 2020 where Silvergate acted as a depository institution "with respect to credit and/or debit entries initiated by BlockFi through Silvergate to accounts maintained at Silvergate and other depository financial institutions."

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.

"Silvergate shall immediately release $9,850,000 from the Silvergate Reserve Account to an account designated by the Debtors," the order said, while permitting Silvergate to hold the remaining $150,000 in the reserve account.

The court order is part of BlockFi’s ongoing bankruptcy proceedings, which became the first company to file for bankruptcy in the aftermath of the collapse of FTX. The crypto lender has more than 100,000 creditors and owes between $1 billion and $10 billion to those creditors.

Founded in 2017, BlockFi was a digital asset lender once valued at $3 billion. As of 2021, BlockFi had between $14 billion and $20 billion worth of customer deposits and had lent out $7.5 billion. 

Notably, while BlockFi and Silvergate have been working together over the past years, the due did not have a very close