BlockFi was a New Jersey-based cryptocurrency financial services company founded in 2017 that offered retail customers interest-bearing crypto accounts, crypto-backed loans, and a Bitcoin rewards credit card. At its peak, BlockFi held over $10 billion in assets under management and was valued at approximately $3 billion in a 2021 funding round. The company filed for Chapter 11 bankruptcy on November 28, 2022, just weeks after FTX’s collapse — which had cut off the emergency credit line keeping BlockFi solvent.
| — | — |
| Founded | 2017, New Jersey |
| CEO | Zac Prince |
| Co-founder | Flori Marquez |
| Peak AUM | >$10 billion (2021) |
| Peak valuation | ~$3 billion (Series D, 2021) |
| Bankruptcy filed | November 28, 2022 |
| SEC settlement | February 2022 ($100M) |
| FTX credit line | $400M (FTX.US) |
Business Model
BlockFi’s core product was the BlockFi Interest Account (BIA), which paid yields on deposited crypto:
- Bitcoin: up to 6% APY (rates varied over time)
- Ethereum: up to 5.25% APY
- Stablecoins (USDC, GUSD): up to 9.5% APY
These yields were funded by lending deposited assets to institutional borrowers and market makers. BlockFi also originated retail crypto-backed loans and operated a Bitcoin rewards Visa credit card in partnership with Visa and Sutton Bank.
SEC Settlement — February 2022
BlockFi became the first major crypto firm to reach a settlement with the SEC over its interest account products. In February 2022, the SEC charged BlockFi with:
- Failing to register its BIA as a security
- Making false and misleading statements about collateralization of institutional loans
Settlement terms:
- $100 million in penalties ($50M to SEC, $50M to 50 state regulators)
- BlockFi agreed to register a new product — BlockFi Yield — as a security under the Securities Act
- Crucially, BlockFi was required to stop opening new BIAs for US customers
This was the most significant crypto lending enforcement action prior to the 2022 collapses and set a precedent for SEC treatment of yield-bearing crypto accounts.
Three Arrows Capital and Early Distress
Like Voyager and Celsius, BlockFi had exposure to Three Arrows Capital. When 3AC defaulted in June 2022, BlockFi was forced to liquidate collateral. BlockFi publicly disclosed that it had liquidated “a large client” (widely identified as 3AC) — claiming it had not suffered significant losses because the loan was overcollateralized. However, the losses were later revealed to be substantial.
The FTX.US Lifeline
In July 2022, following the market panic triggered by Celsius and Voyager collapses, BlockFi secured an emergency $400 million revolving credit facility from FTX.US — the US arm of Sam Bankman-Fried’s FTX exchange. FTX.US also received an option to acquire BlockFi at a valuation of $240M (down from the $4.8B BlockFi had sought in a prior proposed acquisition).
The credit line effectively made FTX.US BlockFi’s lender of last resort — and created a direct dependency.
Collapse: FTX Falls, BlockFi Follows
On November 11, 2022, FTX filed for bankruptcy. BlockFi immediately halted withdrawals — customers could no longer access funds. The $400M credit facility that had kept BlockFi operational was now worthless. BlockFi filed Chapter 11 on November 28, 2022 in the District of New Jersey.
Bankruptcy filings disclosed:
- 100,000+ creditors
- Largest unsecured creditor: FTX.com ($275 million claim)
- Estimated recoveries initially projected below 50 cents on the dollar
Customer Outcomes
BlockFi spent most of 2023 navigating Chapter 11 proceedings. A reorganization plan approved in 2024 provided partial customer recoveries. The company’s assets, intellectual property, and remaining value were sold or distributed through the bankruptcy estate.
Research
- U.S. Bankruptcy Court, D.N.J. (2022). “In re BlockFi Inc., Case No. 22-19361.” Voluntary Petition and First Day Declarations, November 28, 2022.
- SEC (2022). “BlockFi Agrees to Pay $100 Million in Penalties and Pursue Registration of Its Crypto Lending Product.” SEC Press Release 2022-26, February 14, 2022.
- Leising, M. (2022). “How BlockFi Became FTX’s Rescue — and Then Its Victim.” Bloomberg, November 2022.
- Prince, Z. (2022). “BlockFi Frequently Asked Questions — FTX Exposure.” BlockFi Corporate Blog Post, November 2022.
- Chainalysis (2023). “Crypto Crime Report 2023: Crypto Lending and the 2022 Contagion.” Chainalysis Annual Report.