BlockFi’s Uninsured Funds Worth $227 Million Allocated to Silicon Valley Bank’s Money Market Mutual Fund (MMMF)

In a shocking turn of events, Silicon Valley Bank (SVB), one of the largest banks in the United States, has been shut down by the California Department of Financial Protection and Innovation (DFPI) on March 10, 2023. The closure was made without any explanation provided by the regulators, leaving many investors and financial institutions wondering what had happened to their investments.

The closure of SVB is now causing ripples throughout the financial world, particularly in the crypto industry. One of the companies that seem to be directly impacted by this closure is Circle Internet Financial, the issuer of the USDC stablecoin. The company has expressed concerns over the fate of its deposits at SVB, one of its six banking partners responsible for managing a quarter of the assets backing its $43 billion stablecoin.

But Circle is not alone in this predicament. According to a new bankruptcy filing, defunct crypto lender BlockFi has $227 million worth of uninsured funds allocated to a money market mutual fund (MMMF) offered by SVB. This adds to the recent Silvergate bankruptcy, which has seen crypto markets tumble since the crypto-friendly bank’s financial woes came to light at the beginning of March.

In the ongoing BlockFi bankruptcy case, a March 10 filing indicates that the firm has $227 million worth of capital in an MMMF offered by SVB. The funds are not insured by the Federal Deposit Insurance Corporation since they are in a money market mutual fund. The U.S. Trustee overseeing BlockFi’s Chapter 11 bankruptcy case made this known in the filing. It is important to note that the standard deposit insurance amount is $250,000 per depositor, per insured bank for each account ownership category, according to the FDIC’s website.

The balance summary statement provided by the bank for that account states that “money market mutual fund investments are: not a deposit, not FDIC insured, not insured by any federal government agency, not guaranteed by the bank, may lose value.”

The impact of Silicon Valley Bank’s bankruptcy was felt by USDC, as the USDC/USDT trading pair on OKX experienced a significant drop to $0.973, while the BUSD/USDT trading pair on Binance saw a drop to $0.9873. These were the lowest points recorded since mid-April 2021.

The news of SVB’s closure and the potential impact on companies such as Circle and BlockFi, highlights the need for investors to exercise caution when dealing with unregulated financial institutions. It also underscores the importance of diversifying investment portfolios across multiple institutions to mitigate risk.

In conclusion, the closure of SVB has caused significant concern among investors, especially those in the crypto industry. The fate of deposits and investments made in the bank is currently unknown, and many are left wondering what the future holds. The ongoing BlockFi bankruptcy case and the recent Silvergate bankruptcy demonstrate that the financial world can be volatile and unpredictable, and investors must remain vigilant to protect their assets.

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