How is lending to a crypto company different from DeFi lending, and what happened to Celsius, Voyager, BlockFi and Genesis?

You lend to a company

Some companies offered accounts that paid interest on crypto deposits. In February 2022, SEC staff warned that these accounts may sound like bank accounts, but are not as safe as bank or credit union deposits.¹

The company may lend your crypto to borrowers, or invest it in other schemes, and pays you from what it earns.¹ SEC staff listed the risks, including market swings, the company failing or going bankrupt, and fraud or hacks.¹ They added that crypto sent to these companies was not insured.¹

The FSB described how a lender like this can break. Some platforms promised customers they could withdraw at any time, while investing deposits in things that were harder to sell. When many customers want their money back at once, such a platform may fail to pay.⁴

Celsius

US prosecutors said Celsius offered "rewards" on deposits, as well as loans and custody, and marketed itself as the "safest place for your crypto".² By the autumn of 2021, they said, it was one of the world's largest crypto platforms, holding about $25 billion of assets at its peak.²

Celsius halted withdrawals on 12 June 2022, leaving customers with $4.7 billion of assets they could not reach. It filed for bankruptcy on 13 July 2022.² The FSB linked its trouble to the collapse of TerraUSD and a fall in staked ether (stETH) against ether.⁴

Its founder and former chief executive, Alexander Mashinsky, pleaded guilty on 3 December 2024. On 8 May 2025, he was sentenced to 12 years in prison for commodities fraud and securities fraud.² Prosecutors said he deceived customers about Celsius's financial health and rigged the price of its token, CEL.² In May 2026, he asked the court to set aside his sentence. As of October 2026, the court had not ruled; it had given him until 11 December 2026 to reply to the government's opposition.¹¹

Voyager

Voyager filed for bankruptcy in July 2022. The FSB linked this to Three Arrows Capital, a crypto fund, failing to repay its loans.^4,3

On 28 July 2022, two US bank regulators, the FDIC and the Federal Reserve, sent Voyager a joint letter demanding that it stop making false and misleading statements about FDIC deposit insurance.¹² They said Voyager itself was not insured by the FDIC, so its customers would get no insurance cover if Voyager failed.¹²

In October 2023, the FTC, a US consumer protection agency, charged that Voyager had used promises that deposits were "safe" to attract customers, who lost more than $1 billion of crypto when it failed.³ Voyager's companies settled without admitting or denying the allegations. In November 2023 the court entered the order. It bans them for good from handling consumers' assets, with a $1.65 billion judgment that is suspended so that Voyager can return its remaining assets through the bankruptcy.^13,3

BlockFi

In February 2022, the SEC charged BlockFi over its BlockFi Interest Accounts. Through them, investors lent crypto to BlockFi in exchange for its promise of monthly interest.⁷ The SEC's order found that the accounts were securities that should have been registered, and that BlockFi had made a false and misleading statement about the risk in its lending.⁷ BlockFi settled without admitting or denying the SEC's findings and agreed to pay a $50 million penalty to the SEC. In parallel actions, it agreed to pay $50 million in fines to 32 states.⁷

The FSB reported that BlockFi also had significant losses from its exposure to Three Arrows Capital. It halted withdrawals in November 2022, as FTX collapsed, and later filed for bankruptcy itself.⁴ Module 17 covers FTX.

Genesis

Through the Gemini Earn programme, customers of the exchange Gemini lent crypto to Genesis, in exchange for its promise to pay interest.¹⁰ The SEC alleged that in November 2022, Genesis stopped Gemini Earn withdrawals because it lacked enough liquid assets. The SEC said that at the time it held about $900 million from 340,000 investors.¹⁰

In January 2023, the SEC charged Genesis and Gemini with selling unregistered securities.¹⁰ Genesis filed for bankruptcy on 19 January 2023.⁵ In March 2024, without admitting or denying the allegations, it agreed to a $21 million penalty, to be paid only after other allowed claims, including those of Gemini Earn investors.⁵ In January 2026, the SEC and Gemini agreed to dismiss the case against Gemini with prejudice, so it cannot be brought again. The SEC said it was using its discretion. It took into account the "100 percent in-kind return" of Gemini Earn investors' crypto, and Gemini's state and regulatory settlements.¹⁴

The common thread

In each case, customers had lent to a company, not to a pool they could inspect. When the company could not pay, their crypto was stuck. SEC staff had listed exactly this risk: the company holding your crypto might fail or go bankrupt.¹