BlockFi CEO Zac Prince Blames Bankruptcy on FTX and Alameda

The federal criminal case against Bankman-Fried closed out its second week Friday with engaging testimony from BlockFi founder and CEO, Zac Prince.

Prince claimed that BlockFi began lending money to FTX towards the start of 2021, increasing the fallen crypto exchange’s borrowing later on in the year at the behest of Bankman-Fried. 

Prince reveal he pushed back against BlockFi’s risk management team on the decision, calling Bankman-Fried “a good borrower.” When Terra collapsed and the crypto market suffered a down turn in mid-2022, BlockFi recalled these loans.

FTX caused BlockFi to fall

When FTX filed for bankruptcy in November 2022, it became clear that their loans to BlockFi had become unrepayable. Later that month, BlockFi followed suit and ultimately declared bankruptcy. Prince estimated that the digital asset lender lost over “a billion dollars” consisting of $650 million of loans to Alameda Research and $350 million in customer funds thanks to Bankman-Fried’s deception.

The revelations from Prince come one day after a blockbuster testimony from the prosecution’s star witness, former Alameda Research CEO Caroline Ellison. In her testimony, Ellison admitted to falsifying seven different balance sheets to make FTX and Alameda seem “less risky” to investors as they misused customer funds. Ultimately, Bankman-Fried selected one he thought was best.

Prince went on to state BlockFi “probably wouldn’t have lent to them at all” had they been presented with factual balance sheets. 

The defense pushes back

In opening statements, the defense argued that Bankman-Fried was “building the plane as he was flying it.” Today, the defense pushed back against Prince in their cross-examination, asking if he had himself ever been a CEO of a crypto firm (he had not). It appears the defense will try to capitalize on Bankman-Fried’s lack of experience and the unchartered terrain that crypto presented in the late 2010s. 

Bankman-Fried shook his head in disapproval during certain points of Prince’s testimony. Earlier this week, he was reprimanded for similar behavior during Ellison’s direct examination. Bankman-Fried’s parents, renowned legal scholars Joseph Bankman and Barbara Fried, were in attendance. 

Looking ahead

It is unclear what next week will look like for the prosecution, however, FTX’s former director of engineering, Nishad Singh, may testify when court picks up again Monday. Lisa Zhang, a co-founder of Modulo Capital and former romantic interest of Bankman-Fried, could also testify.

Bankman-Fried has pleaded not guilty to seven different fraud charges and is currently being held at Metropolitan Detention Center. If convicted, Bankman-Fried faces a maximum of 110 years in prison.