BlockFi employees were discouraged from describing risks in internal communications: Report
Following BlockFi’s Chapter 11 bankruptcy filing with the United States Bankruptcy Court for the District of New Jersey, reports have surfaced about the crypto lending company’s risk assessment and management culture.
As early as 2020, the company culture discouraged employees from “describing risks in written internal communications to avoid liability,“ a former BlockFi employee told Forbes.
Although BlockFi claimed risk management was core to their DNA and central to their mission, reports surfacing paint a different picture of the company. BlockFi executives appear to have prioritized aggressive growth, while dismissing risk management professionals who attempted to do their job.
According to a former employee, an internal team at BlockFi raised concerns about the borrower pool being too concentrated among crypto whales, including mega hedge funds Three Arrows Capital and Alameda Research, to which the management responded that the loans were collateralized.
Reports surfacing about BlockFi’s risk assessment and management culture seem to counter the image the crypto lending firm portrayed to its clients. In a blog post that was updated after the FTX collapse, the company maintained: “Risk management is one of BlockFi’s key strategic advantages and differentiators, powering our track record of delivering market leading interest payments, access to client funds, and preservation of client capital through all market environments.”
Related: Bankruptcy court told FTX and Alameda they owe BlockFi $1B, but it’s complicated
During the first day of hearings in its bankruptcy proceedings, a lawyer for BlockFi shared that the crypto lender has an estimated $355 million stuck on FTX, while the collapsed exchange’s sister company, Alameda Research, had defaulted on a $680 million loan.
While FTX and Alameda owe BlockFi an estimated $1 billion, the state of financial obligations appears to be complicated by the $400 million line of credit extended to BlockFi by FTX.US on July 1.
BlockFi, which previously denied having a majority of its assets custodied at FTX, has cited the collapse of FTX as the reason for its woes.