In the aftermath of FTX's dramatic demise, crypto lending firm BlockFi stunned users with an announcement that it would pause withdrawals. Now, they're waiting confused and without many answers.
"Hello, have assets in BlockFi worth 12k$, no updates from them yet," software developer Vinayak Dhadda told The Block. "Do you think there is any hope to get them back?"
The Nov. 10 announcement came one day after BlockFi said all of its products were functioning normally and employees across the firm were mollifying client concerns about contagion.
"BlockFi will remain fully operational on 11/11 and all crypto transactions, including withdrawals, will continue as normal," the firm told clients earlier in the week.
Even in the hours leading up to the announcement, BlockFi continued to solicit more customer funds onto the platform, according to messages obtained by The Block.
"BlockFi is an independent business entity so the FTX news does not impact us internally," an employee told a client in an email on Nov. 8.
In another email sent on the day it paused withdrawals, the firm tried to lure clients with "the highest rates" it ever offered for fixed terms.
And since BlockFi paused withdrawals, it is still asking customers to park funds on the platform to top up collateral.
"The fastest way to cure margin is to post additional collateral to your loan," BlockFi said in an email sent to one client. "To do this, deposit crypto into your BlockFi Wallet and post collateral to your loan via your BlockFi dashboard."
BlockFi founder and CEO Zac Prince — who is on paternity leave until the end of the year—declined to comment.
This lack of clarity from leadership adds to the confusion surrounding BlockFi, which once boasted a $3 billion valuation and secured backing from investors including Valar Ventures, Paradigm, SoFi, Galaxy Digital and Akuna Capital. Even former CFTC chairman Christopher Giancarlo sat on its board before quitting after four months.
During its high-flying growth in 2021, co-founder Flori Marquez touted the company as one of the "fastest-growing fintech" companies in the world. In March of that year, she reported more than 250,000 clients.
BlockFi's trajectory took a downturn this past summer amid a wider credit crunch that swept crypto's nascent and immature capital markets. While BlockFi did not then declare bankruptcy or pause withdrawals like rivals Celsius or Voyager, it did ultimately enter into a deal with FTX that gave the now-bankrupt crypto exchange run by Sam Bankman-Fried the option to acquire BlockFi. In turn, BlockFi signed a term sheet to secure $250 million through a revolving credit facility.
With the FTX Group now in the process of seeking Chapter 11 bankruptcy protection, BlockFi's future is becoming increasingly cloudy.
One former employee told The Block he feels "sick."
"Evolve Bank notified us that my BlockFi card has been suspended, but crickets from leadership and internal employees have heard nothing," the employee said.
A user who recently had his first child and requested anonymity said he has $20,000 locked up on BlockFi and that a loss could take a toll.
"Not the best time for $20k in the shitter. Gutted right now," he said. "Zac OOO message with his 'exciting news' made me want to puke."
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