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BlockFi Review: What Went Wrong and Alternatives to Consider

Review Updated
Emma Newbery
By: Emma Newbery

Our Cryptocurrency Expert

Nathan Alderman
Check IconFact Checked Nathan Alderman
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BlockFi filed for bankruptcy and paused client withdrawals at the end of 2022. The platform is now frozen and you cannot open a new account or deposit funds. For other options, we suggest reviewing our list of the best crypto apps and exchanges.

BlockFi can no longer be used to buy, sell, or earn crypto as it declared bankruptcy and paused withdrawals in November 2022. According to its bankruptcy filing, it owes between $1 billion and $10 billion to over 100,000 creditors. Read our BlockFi review to find out what went wrong and, if you had assets on the platform, whether you might be able to recover them.

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Bottom Line

BlockFi has declared bankruptcy and cannot be used to buy or sell crypto.



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What went wrong at BlockFi?

BlockFi was founded in 2017 with a mission to "redefine banking." Just over five years later, the platform is now one of several cryptocurrency exchanges that have failed. BlockFi's big draw was its interest-earning accounts. It also offered a crypto credit card and allowed clients to buy and sell crypto. The company attracted a serious number of investors and customers flocked to its products.

However, in 2021, as crypto started to lose its shine, BlockFi found itself in hot water with regulators. Several states outlawed its interest-bearing accounts. The issue? If a crypto account pays interest, regulators argue it fits the definition of a security. Securities are tightly regulated by the SEC. Early in 2022, BlockFi reached a $100 million settlement over the sale of unregistered securities. That split into a $50 million penalty for the SEC and $50 million for various states.

Crypto prices dropped dramatically in 2022. Bitcoin (BTC), the leading cryptocurrency, which reached a high of almost $68,000 in November 2021, fell below $16,000 the following year. The prolonged drop in prices exposed several crypto platforms, some of which had been taking significant risks with client funds. After Three Arrows Capital failed, BlockFi got caught up in the contagion. It got bailed out by FTX, but when FTX collapsed, the firm was out of options.

In a court submission, the BlockFi Official Committee of Unsecured Creditors argue that the collapse of other platforms is only part of the story. It says BlockFI's management "ran their business in a way that caused foreseeable, catastrophic loss."

Is cryptocurrency a safe investment?

There are a number of risks involved in cryptocurrency investment. Key amongst them is that, unlike banks and brokerages, crypto accounts are not protected against failure by FDIC insurance or SIPC insurance. As is the case with BlockFi, if you have assets on a centralized platform that fails, your money could get tied up in bankruptcy proceedings. Plus, if you put your money into a crypto interest-bearing account, it isn't always clear what's going on behind the scenes to generate the interest.

In addition to the platform risk, cryptocurrency prices are extremely volatile. It's a relatively new and unregulated asset class. Cryptocurrency could transform the way we manage money and digital identities, but it could also collapse completely. There's a lot we don't know about how it will develop. It's almost certain that we'll see increased regulation, but there's less certainty about the exact shape of that regulation and the impact it will have on the cryptocurrency market.

Investing always carries risk, but other assets -- such as stocks, bonds, and real estate -- carry a lot less risk. This is why many financial experts advise that crypto should only represent a small proportion of your portfolio. If you want to build wealth, particularly for your retirement, the key is to make consistent contributions to a diverse portfolio. Maximize your tax-advantaged contributions to an IRA or 401(k) and, if you don't have one already, check out our list of top brokerage accounts.


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We’ve found one company that’s positioned itself perfectly as a long-term picks-and-shovels solution for the broader crypto market — Bitcoin, Dogecoin, and all the others. In fact, you've probably used this company's technology in the past few days, even if you've never had an account or even heard of the company before. That's how prevalent it's become.

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Alternatives to consider

If you want to invest in crypto and stocks on one platform: Robinhood is a popular investment app that lets you keep all your holdings in one place. It offers cryptocurrency and stock trading with zero commission fees.

If you want a resilient cryptocurrency platform: There are no guarantees in cryptocurrency, but there are more safeguards in place with an established crypto broker like SoFi Active Investing, which is registered as a broker-dealer with the SEC.



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Next Steps

Can I recover my assets from BlockFi?

Cryptocurrency bankruptcy cases are complex and there isn't a lot of legal precedent. When a bank fails, most accounts are protected by FDIC insurance up to certain limits. This does not apply to BlockFi customers. It's in the hands of the court to decide how to allocate BlockFi's remaining assets.

The following two issues will have a big impact on how much money investors can recover:

  1. How much money BlockFi has to pay back its debts. This part is further complicated because BlockFi had a lot of money tied up in other now-defunct crypto projects such as Three Arrows Capital, FTX, and Alameda Research. If it is able to recover any of this cash from those bankruptcy proceedings, there'll be more in the pot to pay the people it owes.
  2. What order the debts get paid. The second issue is that when a company files for bankruptcy, there's a clear pecking order in terms of who gets paid. Secured creditors (those whose loans are backed by collateral) usually get priority. However, there's an argument that customer funds held in a BlockFi Wallet should not get pulled into the bankruptcy proceedings because they remain the client's property.

The difference between BlockFi Wallets and BlockFi Interest Accounts is key. When customers put funds into the interest-paying accounts, the terms and conditions state that they no longer had ownership of those assets. According to Reuters, in May, the bankruptcy judge gave BlockFi permission to pay $297 million to customers with non-interest-bearing accounts. The judge also said customers with interest-bearing accounts did not own their deposits, meaning that money will be part of the wider bankruptcy proceedings.

If you had assets on BlockFi's platform, visit Kroll's website for detailed information on the case. Kroll is BlockFi's claims agent, and you will likely already have received messages from them explaining how to register your claim.


  • If you're considering opening an interest-paying crypto account, find out how the interest is being generated. For example, some cryptocurrencies use something called a "proof-of-stake" validation method. Essentially, investors can earn rewards by staking their crypto to help maintain the system. This carries certain risks, but they are very different from a crypto lend-earn platform. It isn't always clear who they are lending money to or what risks they are taking to generate those interest payments. If something promises sky-high rates of returns, it's wise to be suspicious.

  • Unfortunately, crypto investors have limited protections against platform failure, fraud, or theft. Some crypto platforms have third-party insurance or funds set up to make investors whole in case of, for example, an exchange hack. But many platforms don't have any external insurance. For those that do, it isn't clear whether that insurance would cover exchange failure. Bank accounts are protected against failure by FDIC insurance. Brokerages have SIPC insurance, which serves a similar function. Right now, there's nothing like this in the crypto world.

Our Cryptocurrency Experts