Rosen Law Firm, a global investor rights law firm, filed a class action against BlockFI founder Zac Prince on behalf of BlockFi stockholders who purchased their BlockFi unregistered Interest Accounts between March 4, 2019, and November 10, 2022.
The BlockFi action accuses the company’s officers of violating securities laws. The class action was filed in the District of New Jersey by Trey Greene, Individually and on Behalf of All Others, Similarly Situated against Zac Prince and others.
According to the complaint, the crypto company BlockFi, Inc., controlled by collective BFI defendants Zac Prince, Flori Marquez, Tony Laura, and Jennifer Hill, sold unregistered securities to class members.
The unregistered securities sold by the BFI Defendants, including Founder Zac Prince, were marketed and sold over several years through misrepresentations, material omissions, and intermittent misrepresentations by Defendant Gemini Trading LLC.
Details of The Lawsuit Against BlockFi Founder Zac Prince
According to the lawsuit, BlockFi’s founder, Zac Prince, made false and misleading statements to promote BIAs, including that BIAs were a safe way to collect interest.
Furthermore, the Complaint alleges that the Defendants omitted and concealed material information regarding the risks associated with BIAs, including through BlockFi’s exposure to FTX Trading, Ltd. and Sam Bankman-trading Fried’s firm Alameda Research, both of which collapsed following revelations that FTX and Alameda were engaging in massive fraud.
Did You Know?
FTX stands for ‘Future Exchange’. FTX was one of the largest exchange platforms for digital currencies. The purchase and sale was recorded in crypto. FTX trading is trusted by many. However, FTX Trading Ltd. is quite dubious.
The lawsuit asserts that BlockFi stopped withdrawals from BIAs following the FTX crash, affecting BIA investors.
Additionally, BIA investors were unaware of conflicts of interest and self-dealing between BlockFi and other companies, like Gemini Trust LLC, which Tyler and Cameron Winklevoss control.
The complaint further claims that by offering and selling BIAs to investors, BlockFi and its founder Zac Prince violated Sections 5, 11, 12(a)(2), and 15 of the Securities Act of 1933.
Moreover, charges of violations of Massachusetts General Law Chapter 110A and Sections 10(b) and 20 of the Securities Exchange Act of 1934 are made in the action.
Who is Zac Prince?
Zac Prince is the founder of BlockFi. Before founding BlockFi, he oversaw business development teams at Orchard Platform, an online lending broker-dealer and RIA, and Zibby, an online consumer lender. Cum Laude, earned a BA in International Business and a minor in Spanish from Texas State University. Zac was an employee at AdMeld from 2010 to 2012. He worked as a Director of Sales at Sociomantic Labs from 2012 to 2014.
Later, he was Vice President of Business Development at Orchard Platform and Cognical. Zac took over as the Founder and CEO of BlockFi in 2017.
BlockFi Overview
About BlockFi
BlockFi was founded in 2017 by Zac Prince and Flori Marquez as a digital asset lender. Its headquarters are in Jersey City, New Jersey. It was once worth $3 billion. In July 2022, the cryptocurrency exchange FTX announced a deal with an option to purchase BlockFi for up to $240 million.
Initially, the company focused on crypto-backed loans, allowing individuals and institutions to borrow cash or stablecoins as collateral against their crypto assets. This service quickly became popular among investors looking for liquidity without selling their crypto holdings. As a result, BlockFi has established itself as a reliable player in the crypto lending space.
How BlockFi Works
BlockFi is a web platform and mobile app for buying, selling, and trading cryptocurrencies. Accounts of BlockFi can be funded via ACH, wire transfer, or cryptocurrency deposit.
BlockFi provides the following services besides cryptocurrency trading:
- Crypto storage through a wallet service
- Crypto-backed loans
- A crypto rewards credit card
BlockFi also offers interest-earning accounts for all of its cryptocurrencies.
How BlockFi Makes Money
BlockFi generates revenue through four primary channels:
- Withdrawal fees
- Trading fees
- Interests in crypto-backed loans
- Rehypothecation
Withdrawal fees are the fees users must pay when they withdraw funds from their platform. Trading fees are those charged on the total value of the trade, whereas interest in crypto-backed loans is the amount BlockFi earns for making these loans available to its users. Finally, rehypothecation uses collateral assets pledged to it as if they were its own.
Fees Overview
BlockFi does not charge cryptocurrency trading commissions. It instead charges a margin based on the asset’s price. The margin is typically around 1%, but it may be higher if liquidity for that cryptocurrency is low.
Withdrawal Fees
BlockFi charges fees for cryptocurrency and wire transfer withdrawals. It does not charge fees for ACH withdrawals to your bank account.
The following are BlockFi’s withdrawal fees:
| CRYPTOCURRENCY | WITHDRAWAL FEE |
| Bitcoin (BTC) | 0.00025 BTC |
| Ethereum (ETH) | 0.0135 ETH |
| Chainlink (LINK) | 2 LINK |
| Litecoin (LTC) | 0.001 LTC |
| U.S. dollar stablecoins (GUSD, USDC, BUSD, PAX, DAI, USDT) | $25 |
| PAX Gold (PAXG) | 0.035 PAXG |
| Uniswap (UNI) | 2.5 UNI |
| Basic Attention Token (BAT) | 60 BAT |
| Wire transfer | $20 (domestic), $30 (international) |
Loan Rates & Fees
On all crypto-backed loans, BlockFi charges a 2% loan origination fee. The interest rate ranges between 4.50% and 9.75%. It is calculated using the loan-to-value (LTV) ratio, which is the loan amount divided by the amount of collateral provided. Borrowers who provide more collateral benefit from lower interest rates.
BlockFi’s interest rates and the LTV ratios:
| LTV RATIO | INTEREST RATE |
| 20% | 4.50% |
| 35% | 7.90% |
| 50% | 9.75% |
BlockFi Interest Account (BIA)
The BlockFi Interest Account is the name of the interest-bearing account. Interest can be earned in BTC, ETH, LTC, USDC, GUSD, and PAX. There is no requirement for a minimum balance.
BlockFI Interest Accounts (BIA) are no longer available to new clients who are US citizens or residents of the US. Existing clients who are US citizens or are based in the US will be unable to transfer new assets to their BIAs. The BIAs have not been registered under the Securities Act of 1933. They may not be offered or sold in the United States, to US persons, for the account or benefit of a US person, or in any jurisdiction where such an offer would be illegal.
This account is only available to non-US residents and is provided by BlockFi International, a subsidiary of BlockFi (Bermuda).
Is BlockFi safe for your cryptocurrency?
BlockFi has security standards, but the fact that it offers crypto-backed loans poses a risk during periods of market volatility. To assess BlockFi’s safety, we will first examine its security features and then the potential risks of its lending program.
One of the main risks for BlockFi is that it accepts cryptocurrency as collateral for cash loans. These typically have an LTV ratio of 50% or less, implying that the collateral is worth at least twice as much as the loan. If the value of the collateral falls, the borrower must add more, or BlockFi may liquidate its position.
BlockFi lost approximately $80 million in 2022 when one of its large clients, Three Arrows Capital (3AC), failed to increase its loan collateral. As a result, BlockFi was forced to sign a deal with the FTX exchange.
Conclusion
Rosen Law Firm, a global investor rights law firm, filed a class action lawsuit on behalf of investors in BlockFi Interest Accounts (“BIAs”) between March 4, 2019, and November 10, 2022, against BlockFi Founder Zac Prince, Flori Marquez, Amit Cheela, David Olsson, and Samia Bayou. BlockFi is a digital platform that offers a crypto wallet, crypto-backed loans, and live crypto trading.
The Complaint alleges that the Defendants omitted and concealed material information regarding the risks associated with BIAs. The complaint also claims that BlockFi and its founder Zac Prince violated Sections 5 and 11 of the Securities Act of 1933 by offering and selling BIAs to investors. Furthermore, the action alleges violations of Massachusetts General Law Chapter 110A and Sections 10(b) and 20 of the Securities Exchange Act of 1934.
People like Zac Prince are the reason why various people think that online trading is a scam. This would be the drawback of the investors that they are unable to find a legitimate firm or website that literally cares about investors’ funds.
Investing in this platform would not be a wise decision. No future investment would be made in this company.
In most of the cases, it would be seen many people were investing in the firm without researching it properly. Later, they had to suffer heavy losses.
If you have just started in crypto trading then these platforms.
This article is a warning for investors, who want to invest their hard-earned money in these types of fake platforms. It is better to save your money.
These bogus firms are only here to earn money. There would be a lack of transparency and no safety of funds. I advised avoid these companies and go for the other that really cares about its clients.
Stay away from them.
Making investments in a firm where customer service is poor, no accountability and no permitted certificate from the regulatory authority may include some considerable risk.
There were various complaints against the firm. This raises the issue of the firm’s credibility.
Get your invested money out of your account and get it invested with some other firm, investing with them can provide you the major losses, you would ever think of.
It was the worst mistake to invest with this firm, buying any of the cryptocurrency from this company will be your biggest mistake.
Avoid investing with this company, they are full of scams and misleading advertisements.
My personal experience with these scammers is a very depressing one, I invested my saving after buying some cryptocurrency and was promised to get the funds or profit after a month, and I waited so long, but no response was there, then I tried to contact them, the answer they gave was heartbreaking, they responded sorry sir your session has expired I was like WTF, and still requesting them to return my invested money. So beware of investing with these companies no one could go wrong.
Yes, these platforms block the funds of their own investors and people are unable to recover the amount. This website is a nightmare for investors.
The chances of being scammed and not getting the promised profit is higher with this company, so make sure you are not filled by these fraudulent schemes.
Each investor needs to make sure he is not at all attracted to the advertisements of the company and their fake schemes, the trap is set up for having you, with your money.
Now the market isn’t safe anymore for investing, there are people like Zac affecting the market with several scams and nefarious acts.