Asset Manager BlockTower Capital Exposed to Multiple Failed Banks

UTC by Mayowa Adebajo · 3 min read
Asset Manager BlockTower Capital Exposed to Multiple Failed Banks
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The report comes amid a series of bank collapses that happened over the past few days.

Crypto asset manager BlockTower Capital may be the latest victim of the recent collapse of some major banks across the United States. According to a CoinDesk report, four private funds of BlockTower worth about $940 million in gross asset value, were using either Signature Bank or Silvergate Bank. And in one particular case, one of the funds used both failed institutions for its assets custody.

The report comes amid a series of bank collapses that happened over the past few days.

BlockTower Capital Used Silvergate and Other Failed Banks for Asset Custody

According to a May 11, 2022 Form ADV filing, the BlockTower Blue Signum SPV fund used Silvergate Bank as its sole custodian. The fund had approximately $4.6 million in gross asset value as of the time of the filing. The same filing also reveals that the BlockTower DeFi SPV I fund, which had $74.6 million worth of assets, listed only Silvergate as its custodian as well. The $89 million BlockTower Gamma Point Master Fund used Signature Bank as its custodian, while the most diversified of all four funds – the BlockTower Capital Partners Master Fund listed five custodians. The fund, which had nearly $770.5 million in gross assets listed Signature Bank, Silvergate, Coinbase Trust, Anchorage Digital Trust, and Celadon Financial Group.

Meanwhile, per the filing, BlockTower Capital appears to be in trouble following the failure of these banks. However, it is also worth noting that the date of the filing seems long ago and there is the possibility that BlockTower Capital has changed custodians within the period.

Is Another Financial Crisis Playing Out?

Last week, the crypto-friendly Silvergate Bank revealed its plans to liquidate its assets and wind down its business. At the time, the bank claimed that the decision stemmed from holes in its financial figures that its auditors and independent accountants had observed.

Barely two days later, California regulators also shut down tech-focused Silicon Valley Bank (SVB) over insolvency concerns. By March 12, state regulators also swooped in to shut down the operations of New York-based Signature Bank citing systemic risks and that the action was “to protect depositors.”

Expectedly, the quick turn of events has now triggered fears among market participants and onlookers who have noted that SVB’s historic failure is the largest bank failure since the 2008 financial crisis.

At the moment, it is still not clear how the recent bank collapses will shape up. However, regulators are taking no chances and have reportedly taken decisive actions to at least, give depositors a soft landing in this difficult period.

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