Bankrupt Crypto Lending Platform BlockFi Faces Potential $227 Million Loss in Uninsured Funds at Silicon Valley Bank – What's Going On?

cryptonews.com:

Bankrupt crypto lender BlockFi has $227 million in uninsured funds stuck in an account maintained by failed lender Silicon Valley Bank.

According to a March 10 filing by the Justice Department, BlockFi has $227 million parked in a money market mutual fund, which isn’t insured by the Federal Deposit Insurance Corporation (FDIC), at the now-collapsed Silicon Valley Bank. 

The Justice Department said Silicon Valley Bank documents show the BlockFi account isn’t considered a deposit, isn’t insured by the FDIC, and thus might lose value. The federal watchdog claimed BlockFi ignored warnings earlier this month about the dangers of the uninsured account. 

The disclosure comes on the same day that federal regulators seized the bank after its stunning collapse. Silicon Valley Bank had been one of the largest providers of financial services to tech startups including crypto companies. 

Meanwhile, insured depositors are expected to get access to their funds by Monday morning. Depositors with funds exceeding insurance caps will get receivership certificates for their uninsured balances, meaning businesses with big deposits stuck at the bank are unlikely to get their money out soon.

Some in the crypto community have noted that BlockFi’s funds may not be at direct risk despite SVB’s troubles. Certain crypto Twitter users argued that BlockFi’s shares’ value would depend on what’s in the Money Market Funds (MMF), not what happens to Silicon Valley Bank.

"Is this a regular MMF, not affiliated with SVB, custodied at SVB or its securities affiliate? The SVB receivership shouldn't affect that," Twitter user @mattwwaters said. "The MMF is not FDIC insured, but the shares' value would depend on what's in the MMF, not what happens to SVB."

Aside from