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My wife and I had about 10% of our life savings in BlockFi. This is a pretty big blow for us, especially while gearing up to start a family. It's easily in the

• f6v 4y ago
  Off-topic, I had some savings in high-risk stuff(not crypto). Now they’re frozen, almost certainly lost. I’m fine since I knew the risks. Did you not anticipate you might loose your investment there?
• jimmydddd 4y ago
  In traditional bankruptcy proceedings, as you suspected, the little guys are at the extreme back of the line. I would follow the news closely and see if there is any mention of a firm representing individual investors.
• twiddling 4y ago
  Can't get blood from a stone
• woodruffw 4y ago
  I'm sorry for your hardship. My understanding (which is not a professional or legal opinion) is that individual creditors probably come near last in these kinds of bankruptcy proceedings. It's possible that after a prolonged settlement process you may receive some of your money back, but that's not an outcome that I would place substantial faith in. I say this without an ounce of judgement, explicit or implied: can you speak to some of your motivations for putting your life savings into these kinds of vehicles?
  • twiddling 4y ago
    I would build on this and have a frank discussion with your partner about risk tolerance and long term goals around your portfolio. A single exchange failure should not expose you to this much risk.
  • christiangenco 4y ago
    > can you speak to some of your motivations for putting your life savings into these kinds of vehicles? For sure. My rationale was that keeping crypto in cold storage was effectively currency speculation and didn't really do anything to add value to the world. By instead keeping it in an interest-earning account it could be earning interest independent of the exchange rate with USD and providing some value to the world in the form of liquidity and loans. It's the same rationale I use to justify keeping money in VTSAX instead of under my mattress.
    • dnissley 4y ago
      Wouldn't the appropriate analogy to BlockFi be to keeping your money in an interest bearing savings account rather than in VTSAX? Since VTSAX isn't a bank choosing to allocate capital in whatever way they choose
    • Nursie 4y ago
      > providing some value to the world in the form of liquidity and loans. I'm trying to avoid coming across as blaming or rubbing salt in the wounds, but I just wanted to say that the rates they were offering during times of such low interest rates in general, were really be a huge red flag. However you feel about cryptocurrency in general (and it's safe to say I'm a sceptic) you have to look at that and think either that something fishy was going on or they had to have an exceptional business model.
  • stickfigure 4y ago
    Not the OP, but... in the abstract, 10% in a high-risk investment seems pretty reasonable? Sounds like they're young. For someone with a multidecade investing horizion, 10% is a minor fluctuation; the S&P500 is down 17% YTD. To the OP: Why is losing 10% of your investments a pretty big blow? Almost everyone's 401K plunged by more than that this year. If you're young this won't be the last time.
    • christiangenco 4y ago
      OP here! Thanks for the affirmation. My wife and I are 31 so a 10% drop is definitely something we can recover from. We've already lived through this high-risk crypto part of our portfolio falling to half it's value over the last 19 months but the other half completely vanishing overnight has hit me psychologically harder. Instead of the narrative of "sure the crypto dropped in value but it's done that before and gone back up and it's reasonable to think it could go back up again," "now it's on sale," and "time in the market beats timing the market," the narrative is just "it's completely gone because you got defrauded. Here's a list of the specific people responsible. You shoulda been more diligent in evaluating the risk of giving them your money ya freakin' idiot."
      • stickfigure 4y ago
        I get it, it sucks, and it feels like you could have made better decisions. Hindsight is awesome that way. Don't beat yourself up over it; at least you were smart enough to make it a small percentage!
      • soared 4y ago
        Crypto isn’t a high risk investment though, it’s in a category beyond that. You’re definitely going against traditional portfolio structure by having so much in crypto and are kind of getting what you paid for (risk wise).
• cwkoss 4y ago
  I'd suggest setting your expectations that you'll get none of it back. There is a decent chance you'll get a small fraction back in several years, but it all depends on how many assets they have remaining. Keep an eye out for communications from the bankrupcy trustee once there is one - will probably go to the email you used to register your account.
• woah 4y ago
  Can I ask why? If you wanted to put money into crypto, why didn't you use a blockchain where you could verify your holdings and nobody could take them from you? BlockFi was just an incredibly shitty bank.
  • notch656a 4y ago
    Even with 10% losses he lost less than those storing equity in ultra boring indexes. Honestly anybody who only lost 10% in the last year looks like a genius (crypto included).
    • ethanbond 4y ago
      Not really. There are good reasons to lose money and there are bad reasons to lose money. This was a bad one.
      • notch656a 4y ago
        I think it looks less bad in the weird context of 2020-2022, when breaking even with inflation meant moving money into riskier and riskier investments just to keep up with the money printer. I wouldn't have chosen something like BlockFi, but then again I'm one of the idiots that lost via a mix of inflation and various ultra boring indexes. I can see where it might look tempting or even rational to see how long you can keep the hand on the oven without getting burned for some of the interest rates being offered on these "exchanges", especially in times of pretty desperately negative real interest rates on USD.
        • WeylandYutani 4y ago
          I think the lesson is that you can't hide your money from what is going on in the world. No matter what you invest in war, plague and inflation will get you.
    • Imnimo 4y ago
      Your math assumes he lost 0% on the rest of his savings, while "those storing equity in ultra boring indexes" where storing 100% of their savings there. Is that really a fair accounting, in your opinion?
• mmmpop 4y ago
  Sorry but if you put 10% of your net worth into BlockFi you didn't fully understand the risks. I feel bad for anyone who lost money (a few grand here) but this was all akin to a trip to the casino for me and my expectations were set accordingly.
• throwaway_4ever 4y ago
  Let this serve as a reminder to always stick with investments in $VTI and $BND in the future. It'll be a positive.
  • christiangenco 4y ago
    As long as Vanguard doesn't file for bankruptcy!
    • rwmj 4y ago
      Vanguard doesn't hold customer funds, they're held by a separate nominee company. More importantly, it's properly regulated.
• lordnacho 4y ago
  > I'm unfamiliar with how bankruptcy works. I'm not a specialist in the area, but here's my explanation as a financial professional. When a company goes bankrupt, it's assets and liabilities are summarized by an administrator who is hired. Typically a well known firm with lots of experience, and they will do things like find out where the assets are, possibly liquidating some of them. You may have seen that FTX has a new CEO. They are in fact empowered to run the company. There's then something called the capital structure, basically an order in which liabilities are paid to creditors. First of all, you want the admin to want to bother doing the work. So they come first in the queue of people. There's then the tax man (actually, which comes first, admin or tax? Might depend on where you are). Then there are secured creditors. For instance you might have a factory with equipment, and some loan was made against the equipment. Or you have property and a mortgage against it. Then there are unsecured creditors, like employees owed final payments. Depending on how complicated the firm is, the whole credit part of the capital can get super complicated, basically tranches where each junior tranche is only paid if senior tranches are fully paid. It's unusual, but if somehow the assets exceed the liabilities, the equity holders will get the rest. Don't count on that, because it's unusual for such a firm to go bankrupt. Now with high profile bankruptcies there are sometimes investors who will buy your position in the queue. If you get an offer the gamble is basically that it's worth your while to get out immediately and let the bankruptcy speculator deal with all the BS as well as the waiting time to get the money eventually. A friend of mine got offered this from Lehman, turned it down, got paid pretty reasonably, eventually.
  • itake 4y ago
    The blockfi terms said the money was always the client's money and that wallet funds are not lent out. My not-a-lawyer interpretation is I didn't 'give' the money to Blockfi and thus Blockfi doesn't owe me any money. Am I understanding this wrong?
    • notch656a 4y ago
      If someone has 10% of their money on a cex they are either 1) Farming it for interest 2) Collateral for trading / other asset 3) Maybe some other corner case I can't think of here -or- 4) Morons. My guess above was (1) since it was both a large amount and the losses were unexpected. I do not think it would be 'yours' except in the 4th case which would be morons storing unvested deposits on cex for any purpose but short term exchange.
• webinvest 4y ago
  Creditors in Voyager’s bankruptcy were looking at about a 60 cents on the dollar return without a buyout and about 75 cents on the dollar return if FTX could have followed through on their business and accounts buyout, IIRC. Voyager had only 3 creditors so they weren’t well diversified. When one of their creditors eventually went belly-up, they predictably lost about a third of their holdings.
  • christiangenco 4y ago
    Are Voyager's individual creditors getting 60% of their money back or does bankruptcy only pay out to the largest creditors?
    • webinvest 4y ago
      They’re all account holders so everyone is entitled to a proportional slice of the remaining pie. 60% regardless for both the little man and the fat cat. On the other hand, I don’t know if people who retain a class action lawyer specializing in this case get special treatment or not.
• JohnFen 4y ago
  You should talk to a lawyer with experience dealing with bankrupt companies.
• ransom1538 4y ago
  Can someone explain to me this like I am 5 years old. Why would you leave money on the exchange? Why not take it off after you have the coins? I truly am not following. Wont there be a run on all exchanges/indexes?
  • ceejayoz 4y ago
    > Why would you leave money on the exchange? Because the exchanges have been promising sky-high interest rates to get you to do that.
  • christiangenco 4y ago
    Blockfi was promising ~2-4% annual returns for storing your crypto with them—it wasn't an exchange to buy and sell.