Cryptocurrency lender BlockFi misled investors, cut corners and bet big on FTX even after seeing a secret balance sheet that revealed fundamental flaws in Sam Bankman-Fried’s empire, BlockFi creditors said.
The company’s Committee of Unsecured Creditors, representing customers owed money after its November bankruptcy, are arguing the company should be liquidated right away without further costly legal delays, and without freeing executives from future litigation risks.
The report, made in a court filing unsealed Friday, alleges that mismanagement at the company, and in particular its overexposure to failed crypto exchange FTX, exposed the company and its creditors to “losses of a staggering quantum,” which were not just foreseeable, but actually foreseen.
In a Nov. 2 article, CoinDesk revealed that much of the balance sheet of FTX’s hedge fund arm Alameda Research was made up of its own FTT token. That revelation was so fatal to confidence in the exchange that FTX filed for Chapter 11 bankruptcy just nine days later (the coverage also, incidentally, won CoinDesk
