Coinbase Venture-backed crypto lending platform BlockFi says it just liquidated a large client for failing to meet its obligations on an overcollateralized margin loan.
Amid speculations surrounding the firm’s risk management practices, BlockFi CEO Zac Prince says management can resort to margin calls and asset liquidation to mitigate risks with contracts.
[adinserter block="1"]“BlockFi can confirm that we exercised our best business judgment recently with a large client that failed to meet its obligations on an overcollateralized margin loan. We fully accelerated the loan and fully liquidated or hedged all the associated collateral.”
Prince says the firm’s risk management practices aim to protect the interest of its broader client base as well as allow the company to continue its operation regardless of market conditions.
“We continue to actively lend and operate normally across our global suite of products and services.
In fact, we are fulfilling increased demand from institutional borrowers at higher interest rates, similar to rate moves in traditional markets such as the U.S. Treasury yields.”
Prince says other clients were not affected by its recent action. He also assures that BlockFi continues to fulfill all withdrawal requests despite the current volatility of the market.
“No client funds are impacted. We believe we were one of the first to take action with this counterparty.”
The statement comes as the crypto winter significantly impacts businesses in the industry. Earlier this week, BlockFi announced it is laying off workers and reducing spending to remain profitable.
“On the path towards profitability, we have been managing costs throughout our business such as:
– Reducing marketing spend
– Eliminating non-critical vendors
– Reducing executive compensation for myself, Flori and other execs
– Slowing headcount growth and reducing our team size.”
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