BlockFi and Genesis Misrepresented Financials, Creditor Alleges
In this premium interview, I talk with Steve Sokolowski, the chief technology officer at ProHashing. He discussed his experience as a creditor to Genesis and BlockFi, both of which are going through bankruptcy proceedings.
Steve invested in Genesis early in 2021, and performed thorough due diligence on the company in September 2022, after the collapse of Three Arrows Capital.
He says that Genesis presented a balance sheet that indicated that it was a solvent company. (Neither Genesis or BlockFi responded to a request for comment.)
However, that balance sheet counted the infamous $1.1 billion promissory note as a current asset, which Steve believes is a misrepresentation of the financials. Steve also states that Genesis did not disclose anything about its business practices or the GBTC trade.
Steve then turned to BlockFi, which offered higher loan rates than Genesis. However, Steve says he later found out that BlockFi and FTX were closely intertwined despite reassurances from CEO Zack Prince that they were independent entities. Steve invested in BlockFi thinking that it was distanced from FTX, but later found out that that was not the case.
Here’s Steve’s blog post about his experience with BlockFi.
According to Steve, there is something wrong with today's blockchains, which may work well for fast, irreversible transactions, but are not well suited for preventing fraud in the lending industry. He suggests that there needs to be another technology developed that can avoid this sort of thing from happening in the future. If not, he says, the crypto lending industry will never succeed.
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Here is the link to this behind-the-scenes interview (and please don't share because it is supposed to be for subscribers only):
What is a behind-the-scenes interview?
Behind-the-scenes interviews have long been part of my journalistic process. With only 100 episodes of Unchained slots per year, it's impossible to fit every project, creator, or builder into the editorial calendar. However, I love to learn about the latest developments in crypto, so I usually conduct a few such interviews per month with projects who I might want to have on an episode.
These chats usually last 30 minutes and I rarely do much research or write questions for them -- so get ready for tons of straightforward questions and more banter than you might find in an Unchained episode.
If you're interested in learning more about crypto and Web3:
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