Is BlockFi in trouble? Multiple reports of complaints that customers can’t withdraw their funds due to BlockFi’s exposure to Three Arrows Capital
Is BlockFi turning into another Celsius? Over the weekend, Singapore-based Three Arrows becomes the latest in a series of crypto companies reeling from the ongoing meltdown in the crypto market.
Then on Monday, Celsius Network, one of the largest players in the crypto lending space, said it was freezing all withdrawals and transfers for all of its 1.7 million crypto customers due to what the crypto startup described as “extreme market conditions.”
Then yesterday, cryptocurrency-focused hedge fund Three Arrows Capital announced it is unable to meet margin call demands from lenders, causing the leading crypto hedge fund into a crisis that comes as turmoil and credit crunch grip the crypto market. Three Arrows is one of the biggest and most active players in the crypto industry with investments spanning the lending and trading platforms.
According to The Wall Street Journal, Three Arrows is now considering selling its assets. The hedge fund has also hired legal and financial advisers to help work out a solution for its investors and lenders, after suffering heavy losses from a broad market selloff in digital assets, the firm’s founders said on Friday.
“We have always been believers in crypto and we still are,” Kyle Davies, Three Arrows’s co-founder, said in an interview. “We are committed to working things out and finding an equitable solution for all our constituent.”
Meanwhile, Three Arrows’ margin call has already rippled through the entire crypto market. One of the affected crypto companies is crypto lender BlockFi, which recently announced that it has liquidated its position in Three Arrows. In a tweet on the group’s positions.
In a tweet, BlockFi CEO Zac Prince said:
“I’ve been seeing a lot of speculation about BlockFi’s risk management practices that I want to address. While our policy is to not comment on specific counterparties, we are committed to providing as much transparency as possible, and it’s important to know the following:”
BlockFi can confirm that we exercised our best business judgment recently with a large client that failed to meet its obligations on an overcollateralized margin loan. We fully accelerated the loan and fully liquidated or hedged all the associated collateral.
— Zac Prince (@BlockFiZac) June 16, 2022
But many BlockFi customers aren’t buying it. One Twitter user said:
“If you have bitcoin on BlockFi or other custodial “yield” platforms, including exchanges, consider withdrawing everything asap until all this panic settles.”
if you have bitcoin on blockfi or other custodial "yield" platforms, including exchanges, consider withdrawing everything asap until all this panic settles
— ODELL (@ODELL) June 16, 2022
Another user reported having a problem getting his USDC out for about 48 hours but still hasn’t received any confirmation. In response to BlockFi customer who apparently was able to withdraw funds from BlockFi, another BlockFi customer with Twitter handle “Verissimus” tweeted:
“How long did it take you? I’m trying to get my USDC out but i haven’t gotten any confirmation. It’s been almost 48hours.”
How long did it take you? I’m trying to get my USDC out but i haven’t gotten any confirmation. It’s been almost 48hours
— Verissimus (@cryptojmi20) June 16, 2022
Another user shared a screenshot of having a problem withdrawing funds.
According to a report from The Financial Times, BlockFi had some exposure to Three Arrows. In 2020, Three Arrows “made a “strategic” investment in BlockFi” before it later exited the following year. People familiar with the situation also told The Financial Times that Three Arrows had borrowed bitcoin from BlockFi “but had been unable to meet a margin call. One of the people said the liquidation had occurred by mutual consent.”
“We are in the process of communicating with relevant parties and fully committed to working this out,” said Su Zhu, Three Arrows co-founder, on Twitter on Wednesday, without specifically identifying any counterparty. The company did not respond to a request for comment.
Yuri Mushkin, BlockFi’s chief risk officer, said the group “can confirm that we exercised our best business judgment recently with a large client that failed to meet its obligations . . . We believe we were one of the first to take action with this counterparty.”
Founded by Zac Prince and Flori Marquez in 2017, BlockFi is a provider of cryptocurrency-focused financial products, including zero-fee trading and interest-bearing accounts. The company started lending in January 2018, the company offers the ability to leverage Bitcoin and Ether to obtain USD loans.
BlockFi operates in over 44 U.S. states and is backed by leading investors including Galaxy Digital Ventures LLC, ConsenSys Ventures, and SoFi. BlockFi is a secured non-bank lender that offers USD loans to crypto-asset owners who collateralize the loan with their crypto-assets. Our products bring additional liquidity to the blockchain asset sector and meet the needs of both individuals and institutions holding blockchain assets.