Silvergate Bank has been ordered to return $9.85 million to BlockFi as part of the latter firm’s ongoing bankruptcy proceedings, according to March 3 filing.
BlockFi will see $9.85 million returned
That court filing said BlockFi and Silvergate entered into an agreement in August 2020 in which Silvergate acted as a depository institution to process certain ACH transactions. In November 2021, BlockFi agreed to create a reserve containing $10 million.
The agreement states that the account will be terminated 90 business days after the last relevant transfer, giving BlockFi unlimited access to those funds.
As a result, Silvergate is now forced to release $9.85 million from the reserve account. You are allowed to keep the remaining $150,000 in the reserve account.
The injunction is part of BlockFi’s ongoing bankruptcy proceedings. The crypto lending company 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 declared bankruptcy in November 2022, Silvergate said it was less than $20 million exposure to BlockFi. He also said he is not a trustee for BlockFi’s Bbacked by itcoin SEN leveraged loans and had no investment in BlockFi.
Nevertheless, the two companies maintained a close relationship. BlockFi called Silvergate a “banking partner” of November 10 and said it would stop ACH and wire processing for three days due to Silvergate observing a holiday. Later that day, BlockFi announced that it would suspend withdrawals indefinitely due to the separate FTX crash.
This week’s court order forcing the return of the funds does not appear to be related to the recent controversy surrounding Silvergate. On March 1, Silvergate said it would delay its 10-K filing and hinted at various ongoing regulatory investigations.
This development has led several major crypto companies to distance themselves from the crypto-friendly bank. BlockFi did not comment on the Silvergate issues this week.
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