Senior executives at BlockFi overruled repeated warnings from the firm’s risk management team about issuing loans to Alameda Research, creditors alleged in a new report. 

The unsealed report details an investigation by BlockFi’s committee of unsecured creditors, revealing the former management’s refusal to follow repeated warnings from the credit risk department.

Despite being cautioned that substantial loans made to Alameda would be tantamount to high-risk gambles, BlockFi CEO Zac Prince allegedly told his team to “get comfortable” with cash being deployed this way.

The creditors claim that BlockFi was advised in August 2021 that Alameda’s balance sheet comprised $7 billion worth of unlocked FTT, the native token of crypto exchange FTX. This balance sheet was, in fact, the same one cited in the Nov. 2 CoinDesk report, which triggered mass withdrawals from FTX and ultimately resulted in the exchange declaring bankruptcy roughly a week later.

In fact, after the crypto market turmoil that led to LUNA’s collapse in June 2022, BlockFi actually recalled its loans from Alameda.

“BlockFi then could have walked away from the relationship. Instead, it re-lent Alameda nearly $900 million (between July and September 2022), almost exclusively collateralized by FTT,” the creditors said.

The report also presented further revelations about BlockFi, including the fact that the firm allegedly never generated positive operating income in its four-year existence, barring one month in May 2022.

“To satisfy customer yield obligations and seek profit, BlockFi had to accept riskier and riskier investment opportunities,” stated the creditors. 

In doing so, BlockFi lost $215 million to Grayscale Investments, $85 million to Three Arrows Capital (3AC) and a whopping $680 million in FTX and Alameda’s default on collateralized loan obligations.

The creditors findings contradict a report published by independent BlockFi directors and lawyers a few days prior, which concluded that BlockFi’s management had no reason to worry about lending to FTX-related entities before the exchange’s collapse.