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2023-10-16T17:45:23Z

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{{Imported Case Study|source=https://www.quadrigainitiative.com/casestudy/blockfiwithdrawalsdisabledandbankruptcy.php}}
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[[File:Blockfi.jpg|thumb|BlockFi Homepage/Logo]]BlockFi is a cryptocurrency management platform that offers services such as earning interest on cryptocurrency holdings, borrowing cash, and trading cryptocurrencies. It has been backed by financial giants like SoFi and Fidelity. Recently, the platform introduced fee-free trading for Bitcoin, Ethereum, and the stablecoin GUSD. However, BlockFi suspended withdrawals in November 2022 due to uncertainty related to FTX.com, FTX US, and Alameda Research. This move came just two days after assuring users that it was fully operational. The company expressed shock and dismay at the situation surrounding FTX and Alameda. They aim to protect their clients' interests and anticipate providing more information when available. A court order from May 2023 mentioned that digital assets in BlockFi's wallets don't belong to BlockFi, and the platform is working on building functionality to process withdrawals, aiming to grant withdrawals in the summer.

This exchange or platform is based in United States, or the incident targeted people primarily in United States.<ref name="observer-1229" /><ref name="coinspeaker-1230" /><ref name="coindesk-1231" /><ref name="yahoofinance-1233" /><ref name="youtube-11687" /><ref name="blockworks-12011" /><ref name="blockfitwitter-12012" /><ref name="blockworks-12013" />

== About BlockFi ==
"BlockFi is a crypto management platform that lets you leverage your cryptocurrency and put it to fair use." "This platform has been around since 2017, and while it’s independently owned, several financial giants like SoFi and Fidelity back it." "At BlockFi, you can earn up to 8.6% interest per year on your cryptocurrency holdings, borrow cash, buy and sell crypto, and access other bank-like services. It’s like an all-in-one crypto bank." "Today, a growing number of users are using BlockFi as a bank for their cryptocurrency. Just like you use Bank of America or a Credit Union for your fiat currency, you can use BlockFi for your cryptocurrency."

"BlockFi [recently] introduced trading at no fees for Bitcoin, Ethereum and the stablecoin GUSD. The startup has been known to allow users access to returns on their cryptocurrency holdings by offering loans to borrowers against users’ cryptocurrency holdings and then passing across the returns in terms of interest on the loans while securing the crypto assets that were used as security for the loans."

"BlockFi’s cracks are closely related to the lifeline it received in July, when FTX agreed to support the lender with a $400 million credit facility as rival lenders Celsius and Voyager were entering bankruptcy. "

"When BlockFi failed to find much-needed funding elsewhere, Bankman-Fried played the role of crypto rescuer. The fallen crypto mogul had said his firm sought responsible players with sustainable business models that could use short-term liquidity."

"BlockFi, the crypto lender bailed out by FTX earlier this year, has suspended withdrawals only two days after assuring users that it was fully operational."

"In a tweet late Thursday, BlockFi said it cannot operate suitably due to uncertainty surrounding FTX.com, FTX US and Alameda Research. Co-founder Flori Marquez had earlier tweeted the firm remained an independent entity despite its bailout deal with FTX — implying that it was mostly unaffected by the exchange’s implosion."

“We are shocked and dismayed by the news regarding FTX and Alameda. We, like the rest of the world, found out about this situation through Twitter,” BlockFi tweeted.

"Given the lack of clarity on the status of FTX.com, FTX US and Alameda, we are not able to operate business as usual.
Ourpriority has been and will continue to be to protect our clients and their interests.

Until there is further clarity, we are limiting platform activity, including pausing client withdrawals as allowed under our Terms. We will share more specifics as soon as possible. We request that clients not deposit to BlockFi Wallet or Interest Accounts at this time.

We intend to communicate as frequently as possible going forward but anticipate that this will be less frequent than what our clients and other stakeholders are used to."

"Bankrupt crypto lender BlockFi expects to grant customer withdrawals [2023] summer upon the successful completion of essential testing to verify accurate account balances."

The digital assets contained within the custodial omnibus wallets, as of the platform pause, do not belong to BlockFi, Judge Michael Kaplan said in the May court order.

“BlockFi needs to build new product functionality and make changes to the platform in order to process these withdrawals,” the lender said, according to screenshots of the email posted to Twitter.

This exchange or platform is based in United States, or the incident targeted people primarily in United States.

The background of the exchange platform, service, or individuals involved, as it would have been seen or understood at the time of the events.

Include:

* Known history of when and how the service was started.
* What problems does the company or service claim to solve?
* What marketing materials were used by the firm or business?
* Audits performed, and excerpts that may have been included.
* Business registration documents shown (fake or legitimate).
* How were people recruited to participate?
* Public warnings and announcements prior to the event.

Don't Include:
* Any wording which directly states or implies that the business is/was illegitimate, or that a vulnerability existed.
* Anything that wasn't reasonably knowable at the time of the event.
There could be more than one section here. If the same platform is involved with multiple incidents, then it can be linked to a main article page.

== The Reality ==
This sections is included if a case involved deception or information that was unknown at the time. Examples include:

* When the service was actually started (if different than the "official story").
* Who actually ran a service and their own personal history.
* How the service was structured behind the scenes. (For example, there was no "trading bot".)
* Details of what audits reported and how vulnerabilities were missed during auditing.

== What Happened ==
The specific events of the loss and how it came about. What actually happened to cause the loss and some of the events leading up to it.
{| class="wikitable"
|+Key Event Timeline - BlockFi Withdrawals Disabled and Bankruptcy
!Date
!Event
!Description
|-
|November 8th, 2022 10:15:00 AM MST
|Operations Assured
|Flor Marquez, the founder and COO of BlockFi, reports that they "are processing all client withdrawals in line with our Terms of Service" and that "All @BlockFi products are fully operational."
|-
|November 10th, 2022 6:16:00 PM MST
|Withdrawals Suspended
|BlockFi suspends withdrawals and releases a statement on Twitter.
|-
|November 11th, 2022 3:49:14 AM MST
|BlockWorks Article
|BlockWorks reports that withdrawals
|-
|November 12th, 2022 6:52:45 PM MST
|InTheMoney Video
|InTheMoney shares a video discussion about financial YouTubers promoting various financial services and platforms. The speaker expresses concerns about the lack of transparency and due diligence in the promotion of these platforms, particularly regarding BlockFi, which has faced issues recently. The speaker suggests that YouTubers are motivated by money, and advises viewers to be cautious and critical when considering their financial advice. The text contains strong language and criticism of financial YouTubers.
|-
|June 13th, 2023 2:35:54 AM MDT
|BlockWorks Article
|BlockWorks reports that "crypto lender BlockFi expects to grant customer withdrawals this summer upon the successful completion of essential testing to verify accurate account balances."
|}

== Technical Details ==
This section includes specific detailed technical analysis of any security breaches which happened. What specific software vulnerabilities contributed to the problem and how were they exploited?

== Total Amount Lost ==
The total amount lost is unknown.

How much was lost and how was it calculated? If there are conflicting reports, which are accurate and where does the discrepancy lie?

== Immediate Reactions ==
How did the various parties involved (firm, platform, management, and/or affected individual(s)) deal with the events? Were services shut down? Were announcements made? Were groups formed?

== Ultimate Outcome ==
What was the end result? Was any investigation done? Were any individuals prosecuted? Was there a lawsuit? Was any tracing done?

== Total Amount Recovered ==
The total amount recovered is unknown.

What funds were recovered? What funds were reimbursed for those affected users?

== Ongoing Developments ==
What parts of this case are still remaining to be concluded?
== Individual Prevention Policies ==
{{Prevention:Individuals:Placeholder}}

{{Prevention:Individuals:End}}

== Platform Prevention Policies ==
{{Prevention:Platforms:Placeholder}}

{{Prevention:Platforms:End}}

== Regulatory Prevention Policies ==
{{Prevention:Regulators:Placeholder}}

{{Prevention:Regulators:End}}

== References ==
<references><ref name="observer-1229">[https://observer.com/2021/03/blockfi-review-does-blockfi-work-is-it-legit-or-too-risky/ BlockFi Review: Does BlockFi Work? Is It Legit or Too Risky? | Observer] (Jul 5, 2021)</ref>

<ref name="coinspeaker-1230">[https://www.coinspeaker.com/blockfi-zero-fee-trading/ BlockFi Offers Zero-Fee Trading for Bitcoin, Ethereum and GUSD Stablecoin] (Jul 5, 2021)</ref>

<ref name="coindesk-1231">[https://www.coindesk.com/blockfi-rate-cut-on-bitcoin-deposits-leaves-rivals-scratching-heads BlockFi Rate Cut on Bitcoin Deposits Leaves Rivals Scratching Heads - CoinDesk] (Jul 5, 2021)</ref>

<ref name="yahoofinance-1233">[https://finance.yahoo.com/news/blockfi-review-2021-fees-services-215520829.html BlockFi Review 2021: Fees, Services & More] (Jul 5, 2021)</ref>

<ref name="youtube-11687">[https://www.youtube.com/watch?v=gLyNER3z4Rg You Got Robbed | FTX and BlockFI Crash - YouTube] (Dec 11, 2022)</ref>

<ref name="blockworks-12011">[https://blockworks.co/news/blockfi-customer-withdrawals-summer BlockFi set to open customer withdrawals in summer - Blockworks] (Oct 11, 2023)</ref>

<ref name="blockfitwitter-12012">[https://twitter.com/BlockFi/status/1590875997351866368 @BlockFi Twitter] (Oct 11, 2023)</ref>

<ref name="blockworks-12013">[https://blockworks.co/news/blockfi-stops-withdrawals-hinting-ftx-mess-can-only-get-worse BlockFi Stops Withdrawals, Hinting FTX Mess Can Only Get Worse - Blockworks] (Oct 11, 2023)</ref></references>

BlockFi Withdrawals Disabled and Bankruptcy - Revision history