BlockFi Sets Out Timeline For Customer Claims

What happened

Bankrupt crypto lender BlockFi has written to customers to tell them what steps they need to take to register claims and set out the timeline for the coming months. BlockFi declared bankruptcy on Nov. 28, 2022 after freezing customer withdrawals a few weeks before. According to its filing, it has over 100,000 creditors and owes between $1 billion and $10 billion. 

So what

If you're a BlockFi customer, it isn't yet clear whether you'll be able to get your money back, nor how much you'll be able to claim. We haven't seen enough crypto exchange bankruptcies to know how this will play out. What is clear is that BlockFi is doing more than other crypto platforms to both communicate with its customers and return their funds.

Cash held in banks is protected against failure by FDIC insurance for up to $250,000 per account. SIPC insurance gives brokerage customers protection. But there's no such coverage for crypto held on cryptocurrency exchanges. Some U.S. dollar deposits on some platforms may be FDIC insured, but this does not apply to crypto. This leaves crypto investors in a precarious position when it comes to recovering their money if a platform collapses.

Now what

As a BlockFi customer, watch out for an email or letter from BlockFi's claims agent, Kroll. BlockFi has submitted a list of money owed to the court, and Kroll will tell you what assets it thinks you had on the platform. You should also be able to check your balance on Kroll's website. It's important you check that this information is correct. If Kroll has the right records, you don't need to do anything.

According to BlockFi's FAQ, if the information you receive is not correct, you have until March 31 to tell Kroll it's wrong. To do this, you'll need to submit something called a proof of claim. This is a form that Kroll will send along with the info about your holdings. If you don't receive a message from Kroll, you may need to call them toll free on (888) 773-0375 or email [email protected] to update your contact information. 

Many crypto investors were aware of the volatility risks associated with buying Bitcoin (BTC) or other digital currencies. But, until last year, the dangers of platform failure were less known. If you hold your crypto on a centralized exchange, consider what might happen to your assets if the exchange collapsed or got hacked. Look into the pros and cons of moving your funds to a non-custodial crypto wallet.

If you earn interest on the crypto you hold, make sure you understand where your rewards come from. There's a big difference between staking rewards and lend-earn products. Crypto staking is where a specific crypto pays holders rewards for helping to keep the network secure. It is less risky than crypto lending, where a platform might lend out your funds and pay you some of the interest.