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US Bankruptcy Judge Orders Return of Funds to Crypto Lending Institution

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It is reported that according to a court document on Friday, Michael B. Kaplan, a US bankruptcy judge, said that Silvergate Bank must return US $9.85 million t…

US Bankruptcy Judge Orders Return of Funds to Crypto Lending Institution

It is reported that according to a court document on Friday, Michael B. Kaplan, a US bankruptcy judge, said that Silvergate Bank must return US $9.85 million to BlockFi, a cryptographic lending institution. BlockFi filed for bankruptcy protection in November 2022. Shortly after submitting the application, BlockFi began to negotiate with Silvergate to release its US $10 million deposited in the Silvergate reserve account. The two sides have reached an agreement on Friday, and Silvergate will return most of the funds within two working days. According to the previous news, Silvergate Capital Corporation said in the document submitted to the United States Securities and Exchange Commission (SEC) that the company may be “undercapitalized” and said that it was “re-evaluating its business”.

Silvergate Bank must return $9.85 million to BlockFi

Interpretation of the news:


The recent news about Silvergate Bank returning funds to BlockFi, a crypto lending institution, after the latter filed for bankruptcy protection, is a significant event for the cryptocurrency industry.

According to the report, the US bankruptcy judge ordered Silvergate to return $9.85 million to BlockFi, which they had deposited in the former’s reserve account. This move was taken shortly after BlockFi filed for bankruptcy protection in November 2022.

It is interesting to note that BlockFi and Silvergate had begun negotiations for the release of the funds even before the bankruptcy filing. It suggests the willingness of traditional financial institutions to collaborate with emerging crypto businesses.

However, the news about Silvergate being “undercapitalized” is a concerning development. The disclosure made by Silvergate Capital Corporation to the SEC indicates that the company is re-evaluating its business. It implies that the bank may face some financial instability that could affect its clients’ trust in the future.

This news is relevant to the broader crypto industry as it highlights the need for better risk management protocols and regulatory measures. The absence of clear guidelines and protocols for handling crypto-assets can result in situations adversely affecting stakeholders.

The return of BlockFi’s funds by Silvergate is a positive development for the crypto lending industry as it establishes confidence in traditional financial institutions’ ability to work with emerging crypto businesses. Moreover, the ruling by the US bankruptcy judge sets a legal precedent for resolving disputes between traditional financial institutions and crypto companies.

Overall, the news about Silvergate Bank returning funds to BlockFi is a significant development for the crypto industry. It shows the potential for collaboration between traditional financial institutions and crypto businesses, provided the regulatory landscape is clear and transparent.

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