The unnamed group says Blockfee, which holds $1.8 billion in client funds invested in GBTC by Grayscale Investment, may face insolvency problems linked to a negative premium on GBTC shares. Using a negative premium of minus 7.89% on GBTC shares to illustrate the extent of the problem, the unnamed group says Blockfi suffered a $232 million loss.
Anonymous group threatens insolvency Blockfi
According to a statement posted on the anonymous group’s website, Blockfee, which promises its investors a 6% annual interest rate, can only earn for its investors if the premium on GBTC shares exceeds 8%. Blockfi has to pay a management fee of 2% on top of the 6% it promises its investors.
But as Bitcoin.com recently reported, the premium (or discount) on GBTC dropped on the 4th. March briefly reached a record low of nearly minus 12%. However, at the time of writing, the discount on this indicator has fallen to minus 4.73%.
Meanwhile, in its largely anti-blockchain letter, the anonymous group accuses the cryptocurrency firm of pursuing business strategies that harm the interests of investors. For example, a group calling itself the Ditchblockfi team claims that Blockfi investors and institutional borrowers have reported that the cryptocurrency lender has more than $2 billion in unsecured loans to proprietary trading firms.
In describing the alleged unsecured loans, the anonymous group claims that they are opaque private contracts outside the platform, which are not disclosed on Blockfi’s website or in its terms of service.
The group then adds:
Although these are highly successful commercial ventures, defaults do occur, and Blockfi is a central counterparty for every private depositor and corporate borrower. Since many of their loans are concentrated loans of over $100 million, a single default could easily swallow up Blockfi’s equity and push the company into insolvency proceedings.
To protect against potential losses that could result from risky trading practices, Blockfi states in its terms and conditions that in the event of extreme market conditions, payments could be permanently interrupted. However, the Ditchblockfi team used this point to debunk Blockfi, by suggesting that market conditions might have been built in that would allow their unsecured borrowers to default on their loans, resulting in Blockfi’s inability to make deposits.
However, since Blockfi is not licensed as a bank, it is not regulated to hold deposits like a bank, the indictment says. So that means that if it (Blockfi) has solvency problems, it will not be bailed out by the Fed.
Meanwhile, an anonymous group is trying to bolster its claims against Blockfi by posting screenshots of recent public discussions in which Twitter users appear to be discussing the lender’s unfavorable financial situation.
The anonymous group then completes their file by asking other informants who might share information to contact them. For its part, Blockfi recently complained about a wave of attacks this week when it saw 1,000 fake registration emails spamming the platform’s registration page. In addition, financial services platform Blockfi announced Friday that it had raised $350 million in a Series D funding round.
What do you think of the anonymous group’s allegations against Blockfi? Tell us what you think in the comments below.
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