BlockFi, a cryptocurrency lending platform, has been warned by the bankruptcy trustee that the $227m the company has in Silicon Valley Bank (SVB) may go against bankruptcy laws. 

This is because these funds are allegedly not protected by the Federal Deposit Insurance Corporation’s (FDIC) deposit insurance. It is because this amount is invested in a money market mutual fund, which may be illegal per bankruptcy laws.

BlockFi faces scrutiny over lack of FDIC insurance

BlockFi had previously filed for bankruptcy in November last year following FTX’s collapse.

According to paperwork released on Friday about BlockFi’s bankruptcy proceedings, the failed cryptocurrency lender has $227m in funds stored at Silicon Valley Bank (SVB). 

Documents include a balance summary statement by SVB. It indicates that BlockFi’s investment is “not guaranteed by the bank,” not insured by the FDIC, and not covered by any other federal government agency.

The FDIC provides covers deposits up to $250,000 per depositor but not the full range of money market funds.

The U.S. Securities and Exchange Commission regulates money market mutual funds, which invest in highly liquid short-term securities like cash equivalents, cash, and brief debt instruments.

This comes after the California Department of Financia

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Author: Julius Mutunkei

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