Fintech files: BlockFi bust, former Celsius execs tell all, Tory super crypto donor does it again
Just when you thought crypto couldn’t get any more chaotic, another company has filed for bankruptcy – lender BlockFi.
The firm was one of the most exposed to the collapse of FTX and its sister company Alameda Research earlier in November, after taking out a $400 million line of credit that also gave FTX an option to buy the company.
It’s the latest example of the chaos sweeping the crypto space, which has driven the price of bitcoin down to $16,500 – a fraction of the high of $69,000 just over a year ago.
Fitch Ratings’ Monsur Hussain, senior director of financial institutions, said it “highlights significant contagion risks associated with the crypto ecosystem, and potentially deficient risk management processes”.
Celsius directors lay it all out
One of BlockFi’s main competitors was Celsius Network, another lending giant that went bankrupt in June after running on its assets.
Now, Financial news has spoken to two of Celsius’ top executives about what went wrong, and what problems are likely to be replicated across the crypto ecosystem (spoiler: it’s a worrying amount).
When it comes to keeping track of customer funds and recording transactions, many crypto firms are simply not up to scratch, they said.
“We simply don’t have the ecosystem of partners and suppliers available to enable us to do these jobs,” said Matthew De La Fuente, Celsius’ former director of operations.
“It’s human sweat and Google Sheets all the way down—whether you’re a giant exchange or a startup.”
“For most people in traditional finance, it will be shocking,” added Rohit Sabhlok, a former director overseeing trade and infrastructure. “But it’s still just technology [people in crypto]. They have not raised a layer to corporate governance, legal entities and accounting. They don’t have that language yet.”
Headlines this week
The Bahamas bears the brunt of FTX’s brutal collapse
FTSE Russell launches first crypto-based index series
Binance’s $1 billion crypto industry recovery fund raises antitrust concerns
FTX hires former regulators to investigate what led to bankruptcy
Afraid? Are you kidding?
The turmoil doesn’t seem to have put BlackRock off the underlying technology of digital assets, mind you.
Stephen Cohen, head of BlackRock’s operations across Europe, the Middle East and Africa, said United Nations the world’s largest money manager is “exploring” how it can use crypto technology in traditional finance.
“The biggest impact on asset management over time will not be crypto as an asset class – although we can debate back and forth about that,” he said. “The more interesting discussion is about the technology being developed in the crypto and digital asset world and how that will have an application to the traditional asset management world.”
One area the $8tn asset manager is exploring is tokenisation – where shares or shares in an investment fund are digitally represented and can be traded and recorded on a distributed ledger.
“Tokenization is about trying to give more people access to investments. That will be the ultimate goal, Cohen said. “It’s a valuable opportunity over time for the industry.”
Reminder: BlackRock is deep into cryptocurrency, having announced a tie-up with Coinbase earlier this year. It was also one of several traditional financial giants with significant exposure to FTX when it collapsed.
Our favorite stories from around the web
The crypto world may be catching on, but the EU’s politicians are patting themselves on the back. Politico reports on how an FTX-style scandal couldn’t possibly happen with the block’s new Markets in Crypto-assets rulebook… or could it?
Britain’s crypto fraud surged by a third in a year, police documents show, with criminals stealing hundreds of millions of pounds from consumers, Financial Times reports.
A pair of Elon Musk fans spent $600,000 to build a giant statue that features the new Twitter CEO’s head on a goat’s body, riding a rocket, a tribute to their Elon Goat crypto token. Unfortunately for them, Musk didn’t seem to care, reports say The Wall Street Journal.
Concerns about Tory crypto-givers grow
Remember when we reported that Christopher Harborne, a prominent crypto investor and businessman, had donated £500,000 to the Conservative Party?
Well, he’s done it again, the UN revealed on November 24, bringing his annual donation to £1 million and making Harborne the party’s biggest donor.
The Conservative Party insisted there was no connection between the donations and the much-publicized support for crypto.
Labor accused the Tories of “looking after the interests of their wealthy donors”.
We leave readers to form their own opinions…
To contact the author of this story with feedback or news, email Alex Daniel
