Silvergate Bank Ordered to Return $9.85 Million to BlockFi
In accordance with a filing made on March 3rd, Silvergate Bank has been instructed to return $9.85 million to BlockFi as part of BlockFi's ongoing bankruptcy proceedings.
This results from an agreement between BlockFi and Silvergate in August 2020, where Silvergate acted as a depository institution for certain ACH transactions.
BlockFi agreed to establish a reserve containing $10 million in November 2021, with the account set to terminate 90 business days after the last transfer.
As a result, Silvergate is now required to release $9.85 million from the reserve account, while the remaining $150,000 may be held in the reserve account.
This court order is part of BlockFi’s ongoing bankruptcy proceedings, as the company filed for bankruptcy in November 2022, owing between $1 billion and $10 billion to its creditors, with over 100,000 creditors.
Although Silvergate had less than $20 million of exposure to BlockFi and was not a custodian for BlockFi’s Bitcoin-collateralized SEN Leverage loans, nor did it have any investments in BlockFi, the two companies still had a close relationship.
This was evidenced when BlockFi referred to Silvergate as a “banking partner” on November 10th and announced the indefinite halt of withdrawals on the same day due to FTX’s separate collapse.
The court order requiring the return of funds is not related to the recent controversy surrounding Silvergate. On March 1st, Silvergate announced a delay in its 10-K filing and alluded to ongoing regulatory investigations.
This led to several major crypto companies distancing themselves from the bank, although BlockFi did not comment on this issue.