4.Zac Prince — Direct (Part 1)

ZAC PRINCE: I'm originally from San Antonio, Texas.

ZAC PRINCE: I live in Brooklyn.

ZAC PRINCE: I moved to New York City in February of 2010, after finishing college.

ZAC PRINCE: I had a job offer at a technology startup that was attractive and wanted to live in New York City.

ZAC PRINCE: Yes, I founded BlockFi in the fall of 2017.

ZAC PRINCE: BlockFi was a crypto lending platform was how we were most commonly thought of. Our first product was a product that enabled people to borrow dollars with their Bitcoin as collateral, and after launching that first product, we expanded into some other products and lines of business, but broad strokes, we were a crypto lending platform.

ZAC PRINCE: Correct. So we had——we had different products for different types of clients. Specifically, we had products for what we called retail clients, which could be normal people or also businesses in some cases but smaller businesses, and then we had products for institutional clients. On the retail side, the only lending that we did was lending dollars with cryptocurrency as collateral; on the institutional side, our institutional clients could also borrow cryptocurrency in addition to being able to borrow dollars. So they could borrow Bitcoin and have a loan denominated in Bitcoin, whereas on the retail side, it was just borrowing dollars, with Bitcoin as collateral.

ZAC PRINCE: When we were lending out cryptocurrency, that was always coming from products that we had where clients would hold their cryptocurrency on our platform in exchange for interest, so the most popular product we had in this regard was the called the BlockFi interest account. That product offered, you know, various interest rates at various times that folks could earn if they held cryptocurrency in that product. For lending out cash, we at times used the company's equity, at times used debt from institutional credit investors, and also funds from those interest-bearing products that we had on the platform.

ZAC PRINCE: Sure. So on the, you know, on the retail side of our platform, I think at our——at our peak we had around 650,000 clients that had funds in a——in a BlockFi account. The vast majority of those were individuals, and they could have accounts ranging from, you know, on the low end, tens or hundreds of dollars in value, up to, on the high end, tens of millions of dollars in value. So it could be just a, you know, kind of normal everyday investor investing a couple thousand dollars or it could be a rather affluent individual or family office or small business holding, you know, significant capital on our platform.

ZAC PRINCE: Absolutely. This is something that we were very clear about. Everyone knew us as a crypto lending platform. The whole idea was that the way we were able to offer people interest on the funds they were holding on our platform was that we were going to do something with those funds to generate that interest and specifically what we were going to do was lend those funds out to borrowers, and this was clear in our marketing, in our——in our terms of service, and, you know, podcasts that I went on, everywhere. It was very well known and described.

ZAC PRINCE: So as I said earlier, you know, on the retail side of our platform, folks could borrow cash with cryptocurrency as collateral. So that, you know, that ranged——that had a very similar range in terms of the types of borrowers as the types of folks who were holding funds on the platform. It could be, you know, relatively small investor up to a, you know, larger investor or medium-sized business. On the institutional side of our platform, we worked with different types of clients. The most common was trading firms. The trading firms could either be traditional trading firms, so, you know, firms like a Jane Street or a Susquehanna that you might be familiar with in traditional financial markets. They could also be cryptocurrency-specific trading firms. In addition to trading firms, we worked with hedge funds, we worked with different types of corporates in the cryptocurrency world, so exchanges or Bitcoin miners, for example. So on the institutional side of the platform, there's a broader range of the types of——of businesses that we would lend to.

ZAC PRINCE: Yes, we did.

ZAC PRINCE: The relationship with Alameda I believe started in the first half of 2021, or maybe there were a few small transactions towards the end of 2020, but, you know, first half of 2021, roughly.

ZAC PRINCE: Well, there——there came a time that we called back all of the open-term loans that we had to Alameda, which was in June of 2022, and, you know, also a lot of things were terminated as a result of the FTX-Alameda bankruptcy and then subsequently our bankruptcy, but yes, there was a point in time in the summer of 2022 where the loans we had out to Alameda were all called back.

ZAC PRINCE: Early November of 2022.

ZAC PRINCE: At that point in time, when they filed for bankruptcy, the principal outstanding, you know, the amount that they owed us was around $650 million worth of value. A week before that it had been a little higher than that, 800 million, but there had been some payments, you know, in that week leading up to their filing, but $650 million was the amount that Alameda owed us at the time of their filing.

ZAC PRINCE: No. No, that was the——the outstanding balance that to date has still not been paid.

ZAC PRINCE: As a result of FTX and Alameda's bankruptcy, because of our lending to Alameda but also some exposure we had to the FTX platform, BlockFi was forced into——into bankruptcy, and so the clients on our platform have, you know, currently, in any of the interest-earning products, an uncertain outcome in terms of, you know, how much of the funds that they had on our platform they will see back. Our shareholders——

ZAC PRINCE: I'm sorry.