Zac Prince on BlockFi, Bitcoin, and GalaxyOne

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Zac Prince (0:56)

The balance sheets that Alameda was sending to lenders, BlockFi included, were just false. That there were slack messages between Sam and Caroline, where Caroline said, here's the balance sheet I'm about to send to BlockFi or another lender. Sam would say, it doesn't look good, give me other options. She would create seven tabs on the spreadsheet, seven or eight tabs, all in kind of varying degrees of essentially lies.

And then Sam would write back over slack and he would pick the one that was like essentially the biggest lie.

Anthony Pompliano (1:29)

What's going on, guys? Today we have a great conversation with Zac Prince. He's the managing director of Galaxy One. And in this conversation, we talk about what happened at BlockFi. What lessons did he learn? What happened to the industry during the war on crypto? What are the lessons that he took from BlockFi and other crypto banks? And is applying it today at Galaxy One. What do they do? How can they help you? What are the risks? And why does he think that the traditional financial system, merging with crypto, has so many opportunities that you're going to be interested in? This conversation covers a lot. I think it will have a lot of insights for all of you. And I really hope you enjoy my latest conversation with Zac Prince.

All right, Zac, the elephant in the room. What happened with BlockFi?

Zac Prince (2:05)

Not even a hello. How are you doing? Good to see you. No, I'm pumped to be here. It's great to see you. What happened at BlockFi? So if we just think about what caused BlockFi to end in tragedy the way that it did, there were three big moments. The first was the regulatory action in the summer of 2021 Completely out of the blue resulted in us having to turn off new signups from US customers for a period of time and a larger than we could have ever anticipated financial penalty of $100 million. Second, a few months after that concluded in early 2022, two of our largest competitors, Celsius and Voyager, went bankrupt. That prompted essentially a run on the bank, if you want to refer to BlockFi as a bank.

About 85 percent of our customer assets on the platform were withdrawn. We withstood that, processed all the withdrawals, but the company wasn't in the best position at the time. Summer of 2022, crypto was in a bad spot, and we knew that we needed to either raise more capital or attach ourselves to a bigger company. Ultimately, the process that we ran concluded with us getting acquired by FTX.

FTX, ultimately, everybody knows how that ended, but Sam is in prison now. I was a victim witness at the trial for SBF. For technical reasons, we weren't officially part of FTX yet. We were still an independent company. They had an option to acquire us within a year which they were planning on exercising.

But we were still an independent company, so I stayed on as the CEO of BlockFi through the confirmation of our bankruptcy plan. Funds were ultimately, all the funds that were available, were ultimately distributed back to creditors. I think that process is fully wound down at this point in time. But it was a tragedy. I mean, we delivered a ton of value for customers while everything was working and operationally working, and learned a lot, you know. Learned a ton about what types of things I want to do next. Business growth strategies that work and don't work. Risk to avoid, pitfalls to avoid in terms of building a business in crypto or fintech more broadly. And wish it would have ended differently, but that's not the way the cookie crumbled ultimately.