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Sam Bankman-Fried- Case Archive
personpersonZac PrinceZac PrinceFounder of BlockFi, a cryptocurrency lending platform for retail and institutional clients.← All People
Witness· BlockFi

Zac Prince

Founder of BlockFi, a cryptocurrency lending platform for retail and institutional clients.

AppearedFederal Criminal Trial
320 lines·13 proceedings·6 mentions

About

Called by the government, Prince described founding BlockFi and explained its disclosed retail and institutional crypto-lending model. His direct examination began on Day 7 and continued on Day 8, focusing on BlockFi's loans to Alameda and assets held on FTX.

Prince testified that Alameda's borrowing grew to approximately $1.1 billion by May 2022. BlockFi received unaudited balance sheets, wallet information, collateral, and communications rather than audited financials. After Alameda repaid recalled loans during the June 2022 market crisis, BlockFi extended approximately $800 million to $850 million in new loans through early November. Prince said Alameda's reported finances and BlockFi's stress testing made it appear solvent, but materially greater liabilities, borrowing from FTX, executive loans, or use of customer money could have changed BlockFi's decisions.

On cross-examination, Prince acknowledged that he had never operated a cryptocurrency exchange, that BlockFi relied on unaudited counterparty information, and that he had input as CEO on Alameda credit decisions. Defense counsel examined internal warnings about wrong-way risk, volatile and illiquid FTT collateral, and excess exposure. Prince distinguished a proposed loan opposed in an August 2021 credit memo, which he said was not made, from later loans with substantially higher collateral requirements.

Prince identified approximately $650 million in unpaid Alameda loans and approximately $350 million held on FTX. On redirect, he clarified that overcollateralization generally reduced lender risk and that the credit memo's wrong-way-risk concern applied to contemplated Alameda loans secured by FTT. On recross, he declined to identify the Alameda loans as the sole reason for BlockFi's bankruptcy, but testified that BlockFi would not have needed to file in November 2022 if those loans had remained in good standing and its FTX assets had been accessible.

Trial Record (13)

FederalFederal Criminal TrialOct 3, 2023 – Nov 2, 2023Called by prosecution

Called by the government, Prince testified about BlockFi's lending to Alameda, its reliance on unaudited financial information and collateral, and the unpaid Alameda loans and inaccessible FTX assets that contributed to BlockFi's bankruptcy decision.

Day 3

Day 7

DirectZac Prince — DirectZac PrinceNicolas Roos2highlights19lines spoken

Summary

Zac Prince explained BlockFi's disclosed crypto-lending model, testified that Alameda owed it approximately $650 million at bankruptcy, and attributed BlockFi's bankruptcy to Alameda lending and FTX-platform exposure before the court struck the remainder of his answer.

Highlights (2)

testimony highlightPrince explained BlockFi's retail and institutional lending products, the use of customer-held cryptocurrency to fund loans, and its disclosures that deposited assets would be lent to borrowers.Open in transcript →
Quote“Absolutely. This is something that we were very clear about. Everyone knew us as a crypto lending platform.”— Zac PrincePrince characterized BlockFi's practice of lending customer funds as openly disclosed rather than concealed.Open in transcript →

Day 8

DirectZac Prince — DirectZac PrinceNicolas Roos11highlights156lines spoken

Summary

Zac Prince described BlockFi's due diligence and reliance on Alameda's financial statements, explained why it extended hundreds of millions of dollars in new loans, and testified that approximately $1 billion in combined Alameda and FTX exposure was not returned.

Highlights (11)

rulingDefense counsel objected that Prince was moving beyond fact testimony into undisclosed expert opinion. After a sidebar, the court allowed the testimony to stand, limited the inquiry to exchanges with which Prince or BlockFi dealt, and permitted the prosecution to establish Prince's involvement in deposit decisions.Open in transcript →
Quote“To put it simply, the assets stayed within the exchange environment. They weren't re-lent on or taken off of the exchange to be used by some——by some third party.”— Zac PrincePrince stated BlockFi's understanding of how exchanges with which it dealt treated deposited customer assets.Open in transcript →
testimony highlightPrince testified that BlockFi's lending to Alameda grew from approximately $50 million in May 2021 to approximately $1.1 billion in May 2022. He said Alameda supplied unaudited balance sheets, wallet information, and mostly FTT collateral, made timely payments, and met margin calls during that period.Open in transcript →
testimony highlightPrince said BlockFi recalled essentially all open-term loans during the market turmoil of May and June 2022 and that Alameda repaid its recalled loans in full.Open in transcript →
Show all 11 highlights
evidence eventThe court received Government Exhibit 417, a BlockFi credit memo. Prince explained that its stress tests modeled declines of 35 percent, 50 percent, and 100 percent in specified cryptocurrencies and concluded that Alameda would retain approximately $638 million in positive equity even if FTT and Serum fell to zero.Open in transcript →
Quote“Our conclusion was basically that they would still have -- even in a scenario where FTT went to zero and Serum went to zero, they would still have positive equity to the tune of 638 million and change.”— Zac PrincePrince described the conclusion BlockFi drew from its severe stress test of Alameda's reported balance sheet.Open in transcript →
testimony highlightPrince testified that materially greater liabilities could have changed BlockFi's lending decisions and that doubling the reported loan figure might have caused BlockFi not to lend at all. He said BlockFi was unaware of Alameda borrowing from FTX, loans to company executives, or any use of customer money, while qualifying that the effect of additional borrowing would depend on its amount and structure.Open in transcript →
Quote“We probably wouldn't have lent to them at all because I think even without doing a stress test, if they had twice as many loans as what's represented here, they might be insolvent.”— Zac PrincePrince explained how substantially greater loan liabilities could have changed BlockFi's lending decision.Open in transcript →
testimony highlightPrince testified that BlockFi had approximately $350 million of assets on FTX and expected those assets to remain available for BlockFi's trades. After FTT declined, approximately $650 million in Alameda loans and $350 million on FTX were not returned; Prince said the resulting impairment led BlockFi to declare bankruptcy.Open in transcript →
Quote“That they would only be used for the purposes of affecting trades that BlockFi made on the FTX exchange, not that they would ever be rehypothecated or anything like that.”— Zac PrincePrince stated BlockFi's expectation for the assets it deposited on FTX.Open in transcript →
Quote“Sure. I mean, once it became clear that repayment of the Alameda loans and being able to access the funds that we had on FTX was impaired, once it became clear that that was not going to be possible, our view of the financial health of BlockFi's business was such that we needed to declare bankruptcy.”— Zac PrincePrince directly connected the impaired Alameda loans and inaccessible FTX assets to BlockFi's bankruptcy decision.Open in transcript →
CrossZac Prince — CrossZac PrinceMark S. Cohen3highlights139lines spoken

Summary

Defense counsel used BlockFi credit records to examine known risks in lending to Alameda, while Prince distinguished a rejected loan proposal from later, more highly collateralized loans and described BlockFi's reliance on counterparty information.

Highlights (3)

Quote“We always considered the information, and we always relied on the information that we were given by counterparties as being truthful and accurate.”— Zac PrincePrince acknowledged that BlockFi's underwriting relied on the accuracy of information supplied by counterparties, including firms that generally provided unaudited balance sheets.Open in transcript →
testimony highlightPrince explained that the proposed lending required exception approval because it did not fit ordinary risk limits, and that exceptions could reach BlockFi's Board Audit and Risk Committee.Open in transcript →
Quote“At——my understanding was that it was, you know, Caroline who signed the doc but at Sam's instruction, so I was messaging and emailing with Sam at the time.”— Zac PrincePrince attributed the instruction behind the November Robinhood-share collateral document to Sam while identifying Caroline as its signer.Open in transcript →
RedirectZac Prince — RedirectZac PrinceNicolas Roos2highlights5lines spoken

Summary

Prince clarified the risk associated with FTT-backed Alameda loans and testified, over an overruled defense objection, why BlockFi proceeded toward bankruptcy.

Highlights (2)

testimony highlightPrince clarified that the memo's wrong-way-risk concern involved contemplated loans to Alameda backed by FTT collateral.Open in transcript →
Quote“Well, what we were contemplating here was loans to Alameda.”— Zac PrincePrince precisely limited the memo's wrong-way-risk concern to contemplated Alameda loans.Open in transcript →
RecrossZac Prince — RecrossZac PrinceMark S. Cohen2highlights1line spoken

Summary

Prince declined a sole-cause characterization and said BlockFi would not have needed to file in November 2022 if its Alameda loans and FTX funds had not been impaired.

Highlights (2)

testimony highlightPrince declined to characterize the Alameda loans as the sole cause and clarified that BlockFi would not have needed to file for bankruptcy in November 2022 if the loans had remained in good standing and its FTX funds had been accessible.Open in transcript →
Quote“I do not think, in a scenario where those two things were not impaired, that the company would have needed to file for bankruptcy.”— Zac PrincePrince carefully limited his causation testimony to a counterfactual involving both the Alameda loans and BlockFi's inaccessible funds at FTX.Open in transcript →

Day 14

Day 15

Day 18