Plain English
BlockFi was a CeFi lending platform founded in 2017. At its peak managed $10B+ in customer assets, offering interest accounts and crypto-backed loans. Filed for Chapter 11 bankruptcy in November 2022 following FTX collapse exposure. User funds were frozen for years.
How it actually works
BlockFi held significant FTX/Alameda counterparty exposure plus an FTX bailout line of credit. When FTX collapsed, BlockFi’s recovery prospects collapsed with it. Bankruptcy estate eventually returned partial funds to creditors via cash distributions. Interest accounts (BIA) were not registered as securities, triggering the original 2022 SEC settlement.
What it means for you
BlockFi is the canonical lesson in CeFi counterparty risk: a “trusted” US-based platform with strong VC backing and high APRs lost customer funds because it lent customer crypto to FTX. The takeaway: high yields on CeFi platforms reflect counterparty risk, not free lunch. Always assess what the platform does with your deposits.
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Educational content only. Not investment, tax, or legal advice.