An anonymous group has alleged that Blockfi, which has an estimated $ 1.8 billion in client assets invested in Grayscale Investment’s GBTC, is facing potential bankruptcy issues related to the negative premium on GBTC shares. Based on the negative premium of minus 7.89% on GBTC shares to illustrate the extent of the problem, the anonymous group assumes that Blockfi will suffer a loss of USD 232 million.
Anonymous group claims Blockfi bankruptcy threat
According to a statement posted on the anonymous group’s website, Blockfi, which promises its investors an annualized interest rate of 6%, can only make a profit for its investors if the premium on GBTC shares is above 8%. This is because Blockfi still has to pay an administration fee of 2% on top of the 6% it promises to pay its investors.
As recently reported by Bitcoin.com, the premium (or discount) on the GBTC briefly fell to a record low of almost minus 12% on March 4th. However, at the time of writing, that discount had decreased to minus 4.73%.
Throughout the anti-blockfi dossier, the anonymous group accuses the crypto lending firm of pursuing business strategies that are detrimental to the interests of their investors. For example, the group called Ditchblockfi Team claims to have “been informed by Blockfi investors and institutional borrowers that the crypto lender has over $ 2 billion worth of unsecured loans to its own trading companies”.
The built-in clause
In describing the alleged unsecured loans, the anonymous group claims that they are “non-cross-platform, opaque private contracts that are not posted on Blockfi’s website or Terms of Service”.
The group then adds:
Even when they are very successful trading companies, failure occurs and Blockfi is the central counterparty for every retail depositor as well as every corporate borrower. Since we understand that many of their loans are concentrated loans in excess of $ 100 million in size, a single default can easily wipe out Blockfi’s equity base and place them in bankruptcy.
In order to protect itself from the potential losses that may arise as a result of its risky business practices, Blockfi explains in its terms and conditions that redemptions can be permanently stopped in times of “extreme market conditions”. However, using this Blockfi detection clause, the Ditchblockfi team suggests that this was “built in for market conditions that would cause their unsecured borrowers to default on their loans and Blockfi to be unable to withdraw deposits” .
However, since Blockfi is not recognized as a bank, it is “not regulated to hold deposits as a bank,” it says in the allegations. This therefore means that “if there are solvency problems, it (Blockfi) will not be bailed out by the US Federal Reserve.”
Public discussions
Meanwhile, the anonymous group is trying to back up its claims against Blockfi by posting screenshots of recent “public discussions” in which Twitter users appear to discuss the lender’s poor financial position.
The anonymous group then ends their dossier by asking other whistleblowers who may have information to share to contact them. Meanwhile, Blockfi recently complained about a spate of attacks this week when 1,000 fake registration emails spam the platform’s login page. In addition, financial services platform Blockfi announced on Friday that it had raised $ 350 million in a Series D funding round.
What do you think of the anonymous group’s allegations against Blockfi? Let us know what you think in the comments section below.
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