EOS and Block.One founder Brendan Blumer lost over $70m on Silvergate stock

On Nov. 24, 2022, Block.One and CEO Brendan Blumer lodged a 3G with the U.S. Securities and Exchange Commission, claiming 9.27% of the Class A common stock of Silvergate Capital Corp acquired by Block.one.

Since then, Silvergate has fallen by 80%, leading Blumer to lose close to $74 million in the investment. 

Block.one and Blumer investments released a press release referring to Blumer as a passive investor. Block.One owned a 7.46% stake of  Silvergate’s Class A common stock as of Nov 16, 2022, and Blumer possessed a 1.7% balance itemized on the SEC filing. Blumer further admitted to the beneficial holder of all 9.27%.

Silvergate was the major bank related to the fallen crypto exchange platform, FTX, and its financier, Alameda Research – FTX declared itself bankrupt and filed the situation five days before Blumer’s investment. 

EOS and Block.One swam in money

Blumer co-launched Block.One in 2017 with Dan Larimer and Brock Pierce.

Block.One made a tangible amount of money at the peak of its initial coin offering (ICO) craze, claiming to sell over $4 billion in EOS tokens in one year from June 2017. However, like many digital asset firms, US government researcher John Griffin signaled most of the money as wash trade.

Block.One paid a $24 million civil charges fine by the Securities and Exchange Commission (SEC) for trading unregulated securities.

The company also set out to develop an EOS ecosystem and invest in EOS-oriented start-ups. Block.One invested $150 million into an EOS-based social media platform, the Voice, and  $30 million to secure the Voice.com domain name. 

The company faced legal charges, including a lawsuit by an investor accusing it of a fraudulent ICO.

What led Brendan Blumer to invest in Silvergate?

There were very few crypto-friendly banks, and maintaining a bank account as a major roleplayer in the crypto industry takes a lot of work.

However, Silvergate made a name for itself as a digital asset-friendly bank, as other established ones turned away digital asset investors. Silvergate’s reputation might have attracted Blumer’s attention, although the bank’s biggest account holders, FTX and Alameda Investment, were declining.

EOS started on a very high note, with community members joking that the acronym stood for ‘Ethereum on Steriods.’ However, its value had declined from $10 to $4.40 by the end of 2021, with users actively drawing from the platform.

Block.One bore the blunt end of the failure, with community members saying EOS had survival chances if it had been differentiated from Block.One.