BlockFi Credit Card Review 2025

The Real Reasons For the Bankruptcy of BlockFi

BlockFi filed for bankruptcy in November 2022. To fully understand the circumstances that led to this, we must look at their business model and why it ultimately failed.

The exchange was essentially a crypto lending platform that offered users high-yield interest returns on their crypto deposits. The platform earned revenue by lending customer funds to institutional borrowers like hedge funds, equity firms, trading firms, and other large organizations.

The firm’s CeFi (centralized finance) model saw them lend funds to hedge funds and trading firms in the crypto space.

Three Arrows Capital (3AC) defaulted on a large loan and saddled the company with large debt. The challenging market conditions and a prior SEC settlement for unregistered securities and misleading statements worsened the crisis.

To continue operating, BlockFi secured a revolving loan from the infamous cryptocurrency exchange FTX to the tune of around $400 million. However, the exchange faced its challenges and collapsed in November 2022. This ultimately led to the platform’s decision to file for Chapter 11 bankruptcy, in which they cited significant exposure to FTX and $275 million owed on an unsecured loan.

The impact of their bankruptcy was devastating. Users lost their trust in the platform, had their accounts frozen, and faced a complex process for getting their funds back. The court deemed customers who held crypto in non-interest-earning wallet accounts the legal owners and allowed them to recover $297 million.

Users of the high-yield Interest Accounts (BIAs) lost ownership of their assets to BlockFi, making them general unsecured creditors.

What was the BlockFi Visa Card?

The BlockFi Visa card was a real credit card that provided its users with 1.5% cashback rewards on all purchases. For Bitcoin users, the key selling point of the card is that those cashback rewards are denominated in bitcoin. Up to this point, nearly all Visa and Mastercard card offerings related to crypto have been of the debit variety. The main point of these cards was to allow crypto asset holders to quickly spend the value associated with their holdings anywhere Visa or Mastercard is accepted.

With the BlockFi Visa card, the point was to act like a traditional credit card that is common in the traditional financial system while also allowing users to accumulate bitcoin via cashback rewards. This card was closely tied into the overall BlockFi banking platform, as the rewards are automatically deposited into a user’s associated BlockFi interest account.