BlockFi

BlockFi was a centralized crypto lending and wealth management platform that offered interest-bearing accounts, crypto-backed loans, trading services, and later a credit card to retail and institutional clients.

Founded in 2017 and headquartered in Jersey City, New Jersey, the company grew into one of the largest CeFi yield platforms before encountering severe liquidity stress following the collapse of FTX. BlockFi ultimately filed for Chapter 11 bankruptcy in November 2022 and is now in an advanced wind-down phase following court approved recovery and creditor repayment plans.

Overview

BlockFi positioned itself as a bridge between traditional financial services and digital asset markets. The platform allowed users to deposit assets such as Bitcoin (BTC), Ether, and major stablecoins to earn yield significantly above typical bank savings rates.

At its peak, BlockFi reported billions of dollars in client assets and hundreds of thousands of funded accounts, reflecting strong demand for custodial yield products during the 2020 to 2021 bull market. The firm operated on a custodial, centralized model, taking balance sheet risk by rehypothecating client deposits into lending and trading strategies.

History and background

BlockFi was founded in 2017 by Zac Prince and Flori Marquez with the aim of offering secured lending against crypto collateral and later expanded into broader wealth management style services. Early funding rounds were led by prominent venture capital firms focused on fintech and digital assets, and in March 2021 the company closed a $350 million Series D round that valued it at approximately $3 billion.

CryptoSlate reported that by this time BlockFi managed around $15 billion in client assets and generated more than $50 million in monthly revenue, underscoring how quickly centralized lenders scaled during the CeFi yield boom of that period.

Core products and services

BlockFi’s product suite targeted both retail and institutional users seeking leverage, yield, or convenient access to crypto markets using a single custodial provider. Key offerings included:

• BlockFi Interest Accounts (BIAs): Non insured, interest-bearing accounts that paid variable yields on deposits of BTC, ETH, and stablecoins. Yields were funded by lending client assets to institutional borrowers and deploying capital in trading strategies.
• Crypto-backed loans: U.S. dollar loans secured by crypto collateral, allowing clients to access liquidity without selling their underlying assets, a structure that appealed to long term holders with embedded gains.
• Trading and brokerage: In platform spot trading for major assets, enabling users to earn yield, borrow, and trade within a single custodial environment.
• Institutional services: Lending and financing solutions for market makers, hedge funds, and corporate clients, often using large balance sheet lines sourced from retail deposits.

This mix of high yield savings style products and margin style lending made BlockFi a flagship example of centralized yield generation in the crypto sector.

Regulatory actions

BlockFi’s interest accounts drew early scrutiny from U.S. securities regulators. In February 2022, BlockFi agreed to a $100 million settlement with the U.S. Securities and Exchange Commission and multiple state regulators over the offer and sale of unregistered securities linked to its BIAs and related Investment Company Act issues.

The settlement required the firm to halt new BIA accounts for most U.S. clients and pursue a path toward registration. Later, in June 2023, the SEC agreed to delay collection of a remaining portion of its fine to prioritize repayment of BlockFi customers, a step covered by CryptoSlate in the context of the firm’s restructuring and investor recovery efforts.

Bankruptcy, FTX exposure and restructuring

BlockFi’s risk profile became critical in 2022 as market conditions deteriorated amid the failures of centralized players, including Three Arrows Capital (3AC). In mid 2022, BlockFi entered into a high profile agreement with FTX that included a $400 million credit facility and an option for FTX US to acquire the company, signaling reliance on a single strategic backer for liquidity support.

When FTX collapsed in November 2022, BlockFi paused withdrawals and shortly afterward filed for Chapter 11 protection in the U.S. Bankruptcy Court for the District of New Jersey. Court filings indicated more than 100,000 creditors and up to $10 billion in combined assets and liabilities, placing BlockFi among the largest failures of the CeFi lending cycle.

During the bankruptcy process, BlockFi sought to differentiate between custodial wallet balances and yield bearing accounts. In late 2022, the company filed motions to allow wallet only users to regain access to their assets, and subsequent court orders and operational updates, including those reported by CryptoSlate, outlined a phased approach to reopening withdrawals for eligible customers.

Recovery plan, wind down and market impact

In 2023, BlockFi’s reorganization plan received conditional court approval, supported by a strategy to pursue significant claims against FTX, Alameda Research, Three Arrows Capital and other bankrupt counterparties, with potential recoveries cited in the range of up to $1 billion.

On October 24, 2023, BlockFi announced that it had formally emerged from Chapter 11 and entered a wind down phase focused on returning assets to customers. The company indicated that wallet withdrawals would continue and that holders of BIAs and retail loans would be able to access distributions through a separate process beginning in early 2024.

Subsequent regulatory actions, including the permanent revocation of BlockFi’s lending license by California’s Department of Financial Protection and Innovation, and class action settlements involving interest account holders, underscored the legal and consumer protection fallout from the case. BlockFi’s trajectory, from rapid growth and a multibillion dollar valuation to insolvency and eventual full scale wind down, has become a reference point in CryptoSlate’s coverage of CeFi risk, regulatory enforcement, and the structural differences between centralized lenders and on chain, non custodial protocols.

For market participants and policymakers, the BlockFi episode remains a key case study in counterparty risk, opaque leverage, and the importance of transparent balance sheets in the crypto credit ecosystem.