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PayPal Co-Founder Peter Thiel Injects $30 Million into Crypto Firm BlockFi to Improve Cash Flow and Expand Product Lines

Venture capitalist and PayPal co-founder Peter Thiel is backing New York-based BlockFi in a new funding round of $30 million.

The series B offering was led by Valar Ventures, which is a venture capital company backed by PayPal co-founder Peter Theil. Other investors in the offering round included Winklevoss Capital, Avon Ventures, Morgan Creek Digital, CMT Digital, PJC, and Akuna Capital. New investors included Purple Arch Ventures, Arrington XRP Capital, Kenetic Capital, HashKey Capital, and Castle Island Ventures.

BlockFi CEO Zac Prince said, “We decided to raise the Series B offering to expand our balance sheet and give ourselves the capacity to invest in things we want to do this year.”

Product diversification

BlockFi plans to use the $30 million in new funding to expand its staff team and develop new products.

Prince revealed that having HashKey as a Hong Kong-based investor will assist BlockFi in expanding into Singapore later this year. While BlockFi has been serving consumers in the region, this would be its initial physical presence there. Prince stated that BlockFi aims to attract lots of institutional customers in the Asia Pacific region, given that the number of asset managers, mining companies, and exchange and market maker exist there. The company also intends to attract more retail customers in the region as it translates its products and site into local Asian languages.

Prince stated that the firm intends to diversify its products further beyond the crypto lending sector. He mentioned, “We’ll be more and more be recognized as a diversified financial services entity and less and less associated with the crypto lending category.”

For instance, BlockFi aims to issue reward cards and credit cards that make it easier for consumers to receive crypto rewards or spend cryptocurrency when making purchases.

BlockFi intends to introduce a mobile app and the capacity to withdraw and deposit fiat wire transfers in the first quarter of this year. The company wants to provide an automated clearing house (ACH) payments in the second quarter of this year.

The company reports having over $650 million as crypto assets on its platform, a 160% rise from the $250 million in assets it reported in 2019 August, with a zero percent loan loss rate. In January 2020, the firm announced a slight decrease in yield for customers lending Ether and Bitcoin, caused by a more bullish crypto market.

Since last year, BlockFi offers crypto-backed loans, trading products, and interest accounts. The firm has recently begun to make a push into crypto trading, thus allowing users to swap between different kinds of crypto assets. The company is best known for its crypto lending services – the firm lets users leverage their crypto as collateral for a fiat currency loan or deposit their cryptocurrency in “crypto saving accounts” products that let users earn interests on their Ethereum, Bitcoin, and other cryptocurrencies. But critics claim that such offerings carry huge risks with no or little regulatory conditions on the crypto industry.

However, the company is seeing significant growth. Prince mentioned that the firm’s revenue increased by 20-fold since January last year.

Image via New York Magazine

Japanese Financial Giant SBI Group to Borrow from Bitcoin Holders at Annual Rate of 1%

Strategic Business Innovator (SBI) Group or SBI Holdings has rolled out a cryptocurrency rental service dubbed “VC TRADE LENDING” aimed at borrowing crypto assets from customers in exchange for a usage fee based on the period and quantity of lending. The Japanese financial giant with a market cap of around $4.4 billion seeks to offer more trading opportunities in the crypto space.

Bitcoin holders to be the first beneficiaries

As per the announcement:

“VC TRADE LENDING is a service that allows customers to rent out their cryptocurrency assets to us and receive usage fees according to the quantity and period of cryptocurrency assets.”

SBI Group will borrow a minimum of 0.1 Bitcoin (BTC) to a maximum of 5 BTC from holders at an annual interest rate of 1% with the minimum lending period being 84 days. This will work just like regular savings account in a bank, whereby a client lends out fiat money and accrues a yearly interest payment. In comparison, the bank uses these funds for economic services like loans. The company expects to expand this service to other cryptocurrencies like Ethereum (ETH) and Ripple (XRP) in the near future.

Treading with caution

The Tokyo-based financial institution noted that Bitcoin’s volatility was still a concern. Consequently, it needs to tread with caution when dealing with this new crypto lending service.

The rollout of this initiative comes at a time when BTC has been on a massive price rally. Notably, it is a stone’s throw away from the all-time high of $20,000 because it is currently trading at around $19,000. Furthermore, on-chain analytics platform ChartsBTC recently revealed that the Bitcoin trend in 2020 is outperforming the post-halving bull run of 2016.

SBI Group acknowledged that it intended to transform the crypto lending sector because it has suffered from counterparty risks like bankruptcy and defective smart contracts. It stated:

“All of our customers’ lending destinations for our cryptocurrency lending service are SBI Group companies that boast high reliability, so you can use it with confidence.”

By formulating appropriate products, this financial institution seeks to optimize crypto trading opportunities that are market-based.

Virginia Pension Fund Enters Crypto Lending Space to Enhance Returns

Fairfax County Retirements Systems, a $6.8 billion Virginia pension fund, seeks to expand its scope by entering the crypto lending market to boost its returns, according to Financial Times.

This quest became a reality after the board of trustees gave the pension fund the greenlight to start investments in yield farming, whereby investors lend out their digital assets to crypto projects. In return, they attain a fixed stream of income.

Katherine Molnar, the chief investment officer of the Fairfax County Police Officers Retirement System, pointed out:

“Some of the yields that you’re able to achieve in a yield farming strategy are really attractive because some of the people have stepped back from that space.”

It seems the Fairfax County Retirements Systems intends to fill the void left by various leading crypto lenders, with some filing for bankruptcy and others facing an uncertain future.

For instance, cryptocurrency hedge fund Three Arrows Capital (3AC) filed for Chapter 15 bankruptcy last month. The hedge fund’s woes were ignited by the collapse of LUNA-UST, given that it had a significant amount of exposure, Blockchain.News reported. Other embattled crypto lenders include Voyager and Celsius Network.

Fairfax County Retirements Systems is committed to entering this sector because it has already placed $35 million each at VanEck’s new finance income fund and Parataxis Capital’s digital yield fund. This move will be instrumental in providing investors with income through short-term lending arrangements with crypto assets.

Andrew Spellar, investment chief for Fairfax County Employees, noted:

“We started in venture capital and private equity. But once we got more comfortable in the space, we started to think a bit broader about how we might be able to use strategies in digital assets in other parts of the portfolio.”

Meanwhile, different crypto sectors continue attracting more players. For instance, Philcoin, a philanthropic blockchain movement, recently launched a staking mechanism enabling users to donate part of their earnings to charity.

Brazilian Crypto Lender BlueBenx Halts Withdrawals after Suffering Hack of $32M

Brazilian crypto lending platform BlueBenx is currently under scrutiny after it halted its users’ withdrawals.

Per the email shared by the embattled startup to its customers, it claimed that the withdrawal halt was due to the fact that it was hacked to the tune of $32 million.

“Last week, we suffered an extremely aggressive hack in our liquidity pools on the cryptocurrency network after incessant attempts at resolution. Today we started our security protocol with the immediate suspension of operations of BlueBenx Finance products, including withdrawals, redemptions, deposits, and transfers,” the BlueBenx email shared to its customers reads.

While this story was confirmed by the platform’s lawyer, Assuramaya Kuthumi, most of the platform’s customers did not really believe the account of the platform as the core details of the supposed hack was not really made known. In response to the hack, BlueBenx suspended quite a number of its staff, as reported by the local media platform Portal do Bitcoin.

“I think there’s a high probability of it being a scam because this whole hacker attack story seems like a lot of bullshit, something they invented,” a BlueBenx investor revealed to Portal do Bitcoin.

Crypto lending as an offshoot of Decentralized Finance (DeFi) has come under intense scrutiny in recent times as most platforms, even the very big and established ones, have been unable to meet customers’ demands. Most have since halted withdrawals on their platform, and BlueBenx users believe the exchange fabricated this story in part because it could not meet up with its bogus promises.

The BlueBenx platform promises investors as much as 66% in returns on specialized offerings on the platform. Lending platforms like the Celsius Network, Vauld Group, Babel Finance, and even BlockFi, which offers a relatively lower rate of return, have crumbled in the face of the current liquidity pressures that the crypto winter of the first half of the year ushered in.

It is unclear what will happen to BlueBenx investors following the halt of the withdrawals. The exchange has not yet declared a viable way forward.

Assets Belonging to Troubled Crypto Lender Celsius to go Under the Hammer

Celsius Network Ltd, a troubled and bankrupt crypto lender, has disclosed the auction dates for its assets.

Based on a filing with the US Bankruptcy Court for the Southern District of New York, the deadline for the final bid has been slated for October 17, but if need be it will be pushed to October 20.

The filing added:

“A sale hearing will be held on Nov. 1 at 11 a.m. before Chief US Bankruptcy Judge Martin Glenn via Zoom.”

Celsius recently revealed that it was not planning to ask its debtors to pay their outstanding loans during its Chapter 11 bankruptcy proceedings, Blockchain.News reported.

Founded in 2017, Celsius gave interest-bearing products to cryptocurrency owners who deposited their funds, with returns going as high as 18.6% annually. In turn, the firm would lend out cryptocurrencies to gain profits.

The rain started beating the firm because it took more risk than it could handle, according to a Wall Street Journal (WSJ) report. Celsius had a total asset base of $19 billion, but its equity contribution was pegged at just $1 billion.

The WSJ made the analogy that the company’s Asset-to-Equity ratio was more than double the average for all the North American banks in the S&P 1500 Composite index, which is close to 9:1.

Therefore, Celsius has been one of the significant crypto players that have gone down the drain amid this year’s market meltdown. Others include crypto lender Voyager Digital Ltd. and hedge fund Three Arrows Capital.

The native tokens of Terraform Labs, Luna, and UST stablecoin, have also crashed with the company’s founder Do Kwon still at large despite making claims that he is not in hiding.

Celsius Network Shares Details of Its Creditor as it Raises Cyber Threat Concerns

Bankrupt cryptocurrency company Celsius Network has disclosed the information of its creditors in a filing recently provided in court, including names, addresses, the amount owed, and email addresses amongst others.

This is in continuation of the court proceedings after the crypto firm filed for Chapter 11 bankruptcy in the US.

This step was not taken in isolation however, it is in fact a requirement of the law to ensure transparency in handling the debts owed by the firm.

The filing includes more than 14,000 pages of documents, including the details of hundreds of thousands of creditors of the crypto firm.

While several concerns have been raised by the crypto community on the adverse effect that this move by Celsius will have on its creditors, making them vulnerable to cyber threats, the bankruptcy judge in charge of the Chapter 11 proceedings, Martin Glenn has ordered that the physical addresses of the creditors be redacted, but other information should remain.

This is after the legal counsel representing Celsius had presented an appeal before the court requesting for the redaction of names to protect its creditors from being prone to cyber-attacks.

The filing also revealed that the former CEO, Alex Mashinsky had withdrawn approximately $10 million from the network before the crash.

His spokesperson stated that the withdrawal was preplanned and was used to settle tax bills. This however has raised questions and concerns about the involvement of the former CEO in the crash of the Celsius platform.

Added to this, the filing also revealed that other executives of the crypto firm had withdrawn crypto assets worth approximately $8 million.

The spokesperson for the former CEO however noted that the crypto investment of Alex Mashinsky to the tune of $44 million remains frozen on the platform.

Celsius Network filed for Chapter 11 of the Southern District of New York Bankruptcy Court in July because of the prolonged crypto winter and how it has adversely affected the business. The crypto firm, however, promised that all its creditors of about 1.4 million users will be duly compensated for their investment and there won’t be any cause for alarm.

Haru Invest Executives Arrested in $826 Million Crypto Embezzlement Case

South Korea prosecutors have detained three executives from the cryptocurrency yield platform Haru Invest, including its two co-CEOs, on serious charges of embezzlement. They are accused of misappropriating approximately 1.1 trillion Korean won (around $826 million) from about 16,000 users. This case has raised global concerns regarding the stability and transparency of the cryptocurrency sector, especially around crypto lending practices.

Investigations have revealed that Haru Invest advertised its deposits as being managed through “risk-free distributed investment techniques,” despite allegedly investing most of its client deposits through a single individual. This malpractice led to the abrupt suspension of withdrawals in June 2023, exposing the vulnerabilities and risks associated with the crypto lending industry. The firm had offered up to 12% yield for its Earn Plus product users, a claim that has now come under scrutiny.

The arrests follow a broader regulatory crackdown aimed at safeguarding consumers and ensuring the stability of the cryptocurrency sector. This incident underscores the need for more stringent oversight and transparent operations within the crypto lending space to protect investors from fraudulent activities. The case also reflects on the potential risks and challenges that investors face in the rapidly evolving digital asset market, highlighting the importance of due diligence and the role of regulatory bodies in preventing such malpractices.

The aftermath of the arrests and the ongoing investigations into Haru Invest and related entities, such as Delio, illustrate the interconnected risks within the crypto industry, particularly around the management and security of client deposits. The case against Haru Invest not only spotlights the significant impact of fraudulent activities on investors but also serves as a cautionary tale for the crypto industry at large, emphasizing the critical need for enhanced regulatory frameworks and operational transparency to foster a safe and stable cryptocurrency ecosystem.