Crypto Gloss

BlockFi

BlockFi was a New Jersey-based cryptocurrency financial services company founded in 2017 that offered interest-bearing crypto accounts, crypto-backed loans, and a Bitcoin rewards credit card — holding over $10 billion in assets at peak — before filing for Chapter 11 bankruptcy on November 28, 2022, directly triggered by the collapse of FTX, which had provided BlockFi a $400 million emergency credit line that FTX’s bankruptcy made worthless. It is one of the central examples of 2022 crypto contagion.

Business Model

BlockFi’s core product was the BlockFi Interest Account (BIA), which paid yields on deposited crypto:

  • Bitcoin: up to 6% APY
  • 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 settle with the SEC over interest account products. In February 2022, the SEC charged BlockFi with failing to register its BIA as a security and 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
  • 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.

Three Arrows Capital Exposure

Like Voyager and Celsius, BlockFi had exposure to Three Arrows Capital (3AC). When 3AC defaulted in June 2022, BlockFi liquidated collateral and publicly stated it had not suffered significant losses because the loan was overcollateralized. The actual losses were later revealed to be substantial.

The FTX.US Credit Line

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 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).

Collapse: FTX Falls, BlockFi Follows

On November 11, 2022, FTX filed for bankruptcy. BlockFi immediately halted withdrawals — customers could not access funds. The $400M credit facility that had kept BlockFi operational was worthless. BlockFi filed Chapter 11 on November 28, 2022.

Bankruptcy filings disclosed:

  • 100,000+ creditors
  • Largest unsecured creditor: FTX.com ($275 million claim)
  • Initial recovery projections below 50 cents on the dollar

A reorganization plan approved in 2024 provided partial customer recoveries.

History

  • 2017 — BlockFi founded in New Jersey by Zac Prince and Flori Marquez
  • 2021 — BlockFi raises at ~$3 billion valuation (Series D); AUM exceeds $10 billion; Bitcoin rewards credit card launches
  • February 2022 — $100M SEC/state settlement; BlockFi agrees to stop opening new US interest accounts
  • June 2022 — Three Arrows Capital defaults; BlockFi claims losses contained
  • July 2022 — $400M emergency credit line from FTX.US secured; acquisition option granted to FTX.US at $240M
  • November 11, 2022 — FTX files for bankruptcy; BlockFi halts all withdrawals
  • November 28, 2022 — BlockFi files Chapter 11; 100,000+ creditors
  • 2024 — Reorganization plan approved; partial customer recoveries distributed

Common Misconceptions

  • “BlockFi failed because of bad management alone.” — While BlockFi had excessive exposure to 3AC and took on FTX-dependent credit, its ultimate failure was directly triggered by FTX’s collapse — an external event. Management decisions to accept FTX’s lifeline created the dependency.
  • “The SEC settlement saved BlockFi’s customers.” — The February 2022 SEC settlement regulated BlockFi’s products but did not address the underlying credit and counterparty risks that ultimately caused the bankruptcy.

Social Media Sentiment

  • r/CryptoCurrency / r/blockfi: The subreddit became an active forum for bankruptcy creditor coordination; significant anger toward both BlockFi management and FTX for the contagion chain.
  • X/Twitter: BlockFi is referenced in threads about 2022 crypto contagion, CeFi vs DeFi risks, and centralized lending platform failures.
  • Discord: BlockFi’s community Discord became focused on bankruptcy claim status and recovery timeline updates through 2023–2024.

Last updated: 2026-04

Related Terms

See Also

  • Celsius Collapse — the contemporaneous CeFi lending failure that preceded BlockFi’s collapse
  • FTX — the exchange whose collapse directly triggered BlockFi’s bankruptcy
  • Voyager Digital — another CeFi lender that collapsed in the same 2022 contagion wave

Sources