BlockFi deposits billions of dollars at Silicon Valley Bank: Report

BlockFi Deposits With Silicon Valley Bank

BlockFi, a crypto asset (virtual currency) lending service that is undergoing bankruptcy proceedings, was found on the 10th to have deposited a large amount of funds with the bankrupt Silicon Valley Bank (SVB), raising concerns among investors.

After that, it was reported that the investment was in an MMF brokered by SVB, and that the funds had been entrusted to custody, and the turmoil seems to be calming down.

Is this a regular MMF, not affiliated with SVB, custodied at SVB or its securities affiliate? happens to SVB.

— Matt Waters (@mattwwaters) March 10, 2023

The beginning of the matter is the audit report submitted to the bankruptcy court on the 10th. As of January 31, about 116 billion yen ($8.6 billion), or about 20% of BlockFi’s reserves, was deposited with multiple U.S. financial institutions, including SVB, Silvergate Bank, and Bank of New York Mellon. There was found.

BlockFi filed for bankruptcy under Chapter 11 of the U.S. Bankruptcy Code in November last year.

The U.S. Trustee said the company invested $227 million in money market mutual funds (MMMFs) through Silicon Valley Bank, which “is not insured by the Federal Deposit Insurance Corporation.” Trustees have long warned that BlockFi may be violating U.S. bankruptcy law.

A money market mutual fund (MMMF) is an American mutual fund that collects investors’ money and manages it in the money market. It has become an alternative product to bank deposits because of the higher yield than savings accounts and the convenience of being free to convert into cash and being able to draw checks.

Regulated by the U.S. Securities and Exchange Commission, MMF assets are not considered deposits under bank capital regulations, even if they are operated by the same bank, and are insured by the Federal Deposit Insurance Corporation (FDIC). outside.

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What is Silicon Valley Bank?

Silicon Valley Bank (SVB) posted a loss mainly by selling some of its securities holdings. After the stock price plummeted on the 9th, customers requested withdrawals one after another, causing a run on the bank.

Subsequently, California banking regulators shut down SVB. The FDIC announced today that it has ceased operations and placed deposits at Silicon Valley banks under its control. The SVB will be reopened on the 13th and will be open for deposit withdrawals.

The FDIC is a U.S. government agency that acts as a trustee in the event of bank failure and protects deposits. It protects deposits of up to $250,000 per depositor in the event of failure of an FDIC member bank.

SVB ranks 16th in the nation by assets and is believed to be the largest US bank failure since the 2008 financial crisis. In order to avoid the repercussions of the SVB bankruptcy, the US financial market generally shifted to a risk-off mood.

In the US stock market on the 10th, the S&P500 regional bank stock index fell 4%, the New York Dow fell for the fourth consecutive day, and the Nasdaq and S&P500 also fell overall. Bitcoin also fell below $20,000 on the 10th, but recovered to $20,636 (2.78 million yen) at the time of writing.

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