BlockFi was a crypto financial services and lending company founded in 2017 by Zac Prince (CEO) and Flori Marquez (COO) in Jersey City, New Jersey. BlockFi pioneered the retail crypto interest account — offering 8%+ APY on Bitcoin, Ethereum, and stablecoin deposits at a time when traditional savings accounts paid near 0%. These high yields attracted billions in customer deposits, but required BlockFi to re-lend assets to institutional counterparties (including Three Arrows Capital and Alameda Research) — counterparties that ultimately defaulted. BlockFi filed for Chapter 11 bankruptcy on November 28, 2022, one week after FTX collapsed.
Background
BlockFi’s business model was essentially a shadow bank for crypto: borrow assets from retail depositors (paying 8%+ APY), lend to institutional borrowers (charging higher rates), and keep the spread. The model worked as long as institutional borrowers remained solvent. From 2018 to 2021, BlockFi grew assets under management to $10+ billion and raised $450M from Silicon Valley Ventures, Tiger Global, Fidelity, and others.
Key Products
| Product | Description |
|---|---|
| BlockFi Interest Account (BIA) | Earn up to 8%+ APY on BTC, ETH, stablecoins |
| BlockFi Loans | Borrow USD against Bitcoin collateral at competitive LTV ratios |
| BlockFi Trading | Spot crypto trading within the app |
| BlockFi Rewards Visa | Bitcoin cashback credit card (up to 1.5% BTC back) |
Regulatory Troubles
In February 2022, BlockFi reached a $100 million settlement with the SEC and 32 state regulators for marketing its interest accounts as securities without registering them. This was the largest penalty in crypto at the time and forced BlockFi to halt new U.S. interest account signups. It also highlighted that the regulatory framework for crypto yield products was unresolved.
Collapse Timeline
| Date | Event |
|---|---|
| June 2022 | 3AC and Celsius collapse; BlockFi has material counterparty exposure |
| June 2022 | FTX extends BlockFi a $250M credit line and potential acquisition at $240M ($25B→$240M valuation collapse) |
| Nov 11, 2022 | FTX files bankruptcy; BlockFi freezes withdrawals |
| Nov 28, 2022 | BlockFi files Chapter 11; owes FTX $275M+ |
Related Terms
Sources
- BlockFi Bankruptcy Docket — official Chapter 11 proceedings.
- SEC BlockFi Settlement — February 2022 enforcement action.