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BlockFi's consecutive financing and borrowing, is it really stable? SEC commissioner urges not to intervene: Let what should happen happen

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BlockFi

The crypto market has been in turmoil following lending platforms Celsius and venture capital firm Three Arrows Capital, with the community worrying about who will be the next Terra or Celsius. Meanwhile, another lending platform, BlockFi, secured a loan of hundreds of millions of dollars from FTX, further solidifying rumors of its insolvency. SEC commissioners have also publicly expressed opposition to similar crypto bailouts, emphasizing that this is a moment for the market to clarify who the true builders are.

BlockFi Secures $250 Million Credit Line from FTX

Earlier reports indicate that this $250 million "revolving credit line" is different from traditional loans.

Revolving credit offers quick borrowing with no commitment. Within the credit line, BlockFi can borrow and repay as needed without interest charges if the loan is not utilized, and same-day repayments are interest-free. Additionally, there are no penalties for early repayment.

SBF also emphasized that BlockFi's ability to repay is not in question; the need for credit is merely a precautionary measure, demonstrating BlockFi's prudent risk management.

SEC Commissioner

SEC Commissioner Hester Peirce, known as the "crypto mom" for her historically crypto-friendly stance, stated in an interview with Forbes that she does not support bailouts for crypto institutions. She believes it is best to let things happen as they may, fostering a more sustainable foundation.

This is a valuable learning opportunity for market participants and regulators alike. When the market faces challenges, one can see who is truly building sustainable entities and which ones will fade away. I do not support crypto institutions bailing out others, especially those poorly managed and excessively leveraged.

SkyBridge Capital Founder

Anthony Scaramucci of SkyBridge Capital shared a different perspective during an interview with Bloomberg.

He likened FTX founder SBF to a new-age John Pierpont Morgan, akin to J.P. Morgan of the 1970s, who provided funding and persuaded peers to support the banking system during a time of panic, ultimately leading to the creation of the Federal Reserve System.

Community Perspectives

Crypto community member otteroooo referenced leaked profit and loss statements indicating that BlockFi has incurred over $280 million in losses over the past two years. He estimated that only 34 out of every thousand users can withdraw immediately, while others have to wait for BlockFi to reclaim liquidity from other platforms.

As early as 2020, The Block's Research Director Larry Cermak pointed out the opaque cash flows of Celsius. Even before the 3AC incident, the internal situation at BlockFi was already dire. He urged:

From what I know, if I had funds in BlockFi, Nexo, or any other yield product, I would have withdrawn everything yesterday, 6/18. The meager gains you earn on the platform are not worth the high risks you are exposed to.

Former BitMEX co-founder Arthur Hayes also noted in a lengthy post that BlockFi's early June stock sale to raise $1 billion signifies underlying financial issues and anticipates a wave of institutional closures in the market ahead.