BlockFi files for bankruptcy, putting a dent in venture capital funds

Another digital assets startup has collapsed as cryptocurrency lender BlockFi Inc. on Monday said it filed for bankruptcy in the state of New Jersey.

And much like FTX, the failed crypto exchange, BlockFi investors include a who’s who of Silicon Valley and Wall Street venture capital firms, including Russian business tycoon Yuri Milner’s DST Global, Susquehanna Capital, Mark Yusko’s Morgan Creek Capital Management and the Winklevoss twins’ venture fund, according to Pensions & Investments data.

Headquartered in Jersey City, N.J., BlockFi blamed the bankruptcy squarely on FTX, and said in its Chapter 11 bankruptcy filings that it owes its top 10 creditors close to $1.2 billion.

Among the top creditors is the Securities and Exchange Commission, owed $30 million, after BlockFi agreed to settle charges the firm failed to register its products properly.

Founded in 2017 by Zac Prince and Flori Marquez, BlockFi allowed customers to hold and trade bitcoin. BlockFi also inked a partnership in 2021 with Fidelity Digital Assets, which allowed institutional customers to pledge bitcoin as collateral against cash loans. Fidelity Digital is a unit of Boston-based asset manager Fidelity Investments.

BlockFi’s early investing rounds in 2018 included PJC, ConsenSys Ventures, Galaxy Asset Management, Social Finance, Alumni Ventures Group, Lumenary and Kenetic Capital, according to P&I data.

Later that same year, BlockFi raised additional debt funding from Susquehanna Capital, Devonshire Capital, Morgan Creek Capital Management, Recruit Strategic Partners, CMT Digital and Akuna Capital.

In 2019 and 2020, venture funds invested in follow-on Series A, B and C rounds including Winklevoss Capital, Valar Ventures, Avon Ventures, Hashkey Capital, Castle Island Ventures, Arrington XRP Capital, Formic Ventures and Purple Arch Ventures, and SCB 10X, the technology investment arm of Thailand’s oldest bank, Siam Commercial Bank.

In 2021, BlockFi completed a Series D fundraising round led by Bain Capital Ventures, partners of DST Global, Pomp Investments, and Tiger Global.

Additional investors last year included Bracket Capital, ParaFi Capital, Paradigm, The Venture Collective, CMS Holdings LLC, Rose Park Advisors, Definitive Capital Management, Investlink Holdings, Empede Capital, Jump Capital, Breyer Capital, Pacific Century, Hudson River Trading, Third Prime Capital and the Gaingels Syndicate.