On March 15, 2026, BlockFills filed for Chapter 11 bankruptcy. A Chicago-based institutional crypto trading and lending firm, backed by Susquehanna and CME Group’s venture arm, serving 2,000 clients across 95 countries. Gone.
The filing revealed estimated assets of $50–100 million against liabilities of $100–500 million. Weeks before the filing, I was already hearing industry rumors that BlockFills was going under. Withdrawals had already been frozen. Lawsuits alleging commingling and misappropriation of client funds followed almost immediately.
At the first day hearing, BlockFills’ own counsel confirmed what borrowers feared most: customer funds had always been commingled with company funds. Bankruptcy proceedings would dictate that all of it was property of the estate. Borrowers who thought their collateral was safely held would now stand in line alongside every other unsecured creditor.
It was the same story replayed we all witnessed before – Celsius, FTX, BlockFi, Voyager. Every single time, the post-mortem reveals the same structural failures: unregulated entities, commingled funds, rehypothecated collateral, and borrowers left with nothing but a claim number in a bankruptcy proceeding.
The question is no longer whether this can happen again. It is whether you, the borrower, are going to keep giving your business to unregulated lenders and ignoring what the legal agreements you sign actually say about your rights.
BlockFills was not some fly-by-night operation. Founded in 2017. Over $61 billion in trading volume in 2025. SOC 2 Type II certified. On paper, it looked credible.
Beneath the surface, the story was different. BlockFills deployed a significant portion of its 2022 Series A proceeds into crypto mining hardware. Then mining profitability collapsed and the company lost roughly $30 million in that investment alone. On top of that it paid approximately $12 million in employee bonuses against just $900,000 in adjusted profits. Its balance sheet carried a deficit estimated at $77–80 million before the February 2026 crash even happened.
This tendency to pay exorbitant salaries using investor funds is a story a lot of people in this industry know all too well. It stands in stark contrast to my own policy: take no salary at the companies I run until they turn a profit. This was true at Coinberry. It is true here, at APX Lending.
When Bitcoin dropped below $61,000 in early February 2026, the house of cards collapsed. BlockFills froze deposits and withdrawals on February 2nd, privately at first, then publicly on February 6th. Reports emerged that the former CEO had allegedly urged certain clients to withdraw before the freeze. Dominion Capital filed suit alleging that BlockFills had used pooled customer assets for mining operations, equipment purchases, and settlements with other crypto firms.
The pattern is unmistakable. Celsius froze withdrawals in June 2022, then filed for bankruptcy a month later after using customer deposits to fund speculative trades. FTX collapsed in November 2022 when customer funds were funneled to Alameda Research. BlockFi followed within months. Now BlockFills joins the list.
In every case, the root causes are the same. The platform commingled customer assets with its own. In some cases, spent money on exorbitant salaries or expenses. Used assets for purposes borrowers never consented to. Operated outside meaningful regulatory oversight. And when the market turned, could not make customers whole.
Most borrowers never read the fine print. They compare interest rates and LTV ratios, deposit their Bitcoin, and assume their collateral is sitting safely in a wallet somewhere. That assumption can be catastrophically wrong. The difference is buried in the legal language of the loan agreement you sign.
I have built APX Lending from the ground up. I have personally reviewed the loan agreements of multiple competitors in this space. I can tell you that the legal treatment of your collateral varies dramatically between platforms. These differences are not superficial. They determine whether you get your Bitcoin back if the company you borrowed from goes under.
When you take out a mortgage on your home, the bank does not take ownership of your house. It holds a security interest, a lien, that gives it the right to foreclose if you default. But you remain the owner. Your name stays on the title. This is a foundational principle of secured lending that has existed for centuries.
At APX Lending, we built our loan agreements on this same principle. When a borrower pledges Bitcoin as collateral, APX takes a first-priority, perfected security interest, not ownership. In Canada, this security interest is perfected under the Ontario Personal Property Security Act (PPSA). In the United States, where APX operates through APX US LLC (a Delaware limited liability company), the security interest is perfected under the Uniform Commercial Code (UCC). These are established legal frameworks that ensure your collateral is held as your property, not as part of APX's general assets. In a worst-case scenario, this structure is what separates borrowers who can recover their collateral from borrowers who end up as unsecured creditors standing in line. Your Bitcoin remains your property. APX holds a lien, not a deed. Upon repayment, the collateral is returned and the security interest is discharged.
This is fundamentally different from what certain offshore or unregulated lending platforms do. Some agreements include language stating that “full legal and beneficial ownership of the Collateral will transfer to Lender when Borrower transfers such Collateral.” Which means that the moment you send your Bitcoin to the lender, it stops being yours. Legally, completely. What you get in return is not a secured claim against your own property. It is simply a promise that the lender will return “an equivalent amount” when the loan matures. Hopefully.
The distinction becomes critical in a bankruptcy. If the lender holds a security interest in your collateral (as APX does), the collateral is identifiable as your property, separable from the lender’s estate, and recoverable. If the lender took outright ownership via title transfer, your collateral is simply part of the bankrupt estate. You become an unsecured creditor. You stand in line behind secured creditors, behind administrative expenses, behind priority claims. Celsius borrowers learned this lesson. BlockFills borrowers are learning it now.
Even among platforms that use a security interest model, borrowers need to ask one critical question: does the lender reserve the right to rehypothecate your collateral? That means re-using, re-pledging, re-investing or lending out the Bitcoin you deposited.
Some platforms offer “standard” loan products where the lender explicitly reserves this right. Your collateral gets lent to institutional counterparties, pledged to funding partners, or otherwise deployed to generate additional revenue, sometimes to other hedge funds, prop trading desks, market makers, or lenders. In exchange, you might get a lower interest rate. Sounds like a reasonable trade-off on the surface. Until they cannot recover your collateral entirely!
Think about what that actually means. If your Bitcoin has been lent out to a third party and that third party defaults or becomes insolvent, your collateral will not be recoverable, even if the platform you borrowed from is still solvent. You have introduced a chain of counterparty risk that you never even knew about or had a chance to evaluate. The 2022 collapses of Celsius and Voyager were driven in large part by exactly this dynamic. Customer assets were re-invested into increasingly risky deals. When those failed, the collateral evaporated.
Some lenders go even further. Their agreements explicitly state that collateral “may be repledged, sold or otherwise transferred or used for Lender’s own account” without further consent from the borrower. And in a bankruptcy scenario, these same agreements warn borrowers that their collateral may not be recoverable and their claims could be treated as general unsecured claims. They’re telling you, in their own legal documents, that your Bitcoin might be gone. Most people just don’t read it.
At APX Lending, we do not rehypothecate borrower collateral. Period. This is not a marketing statement. It is a core part of the exemptive relief order granted to us by the Canadian Securities Administrators, confirmed in our loan agreements, and enforced through our regulatory reporting obligations. Your Bitcoin sits in segregated cold storage with BitGo, untouched, for the duration of your loan.
Even if a lender does not rehypothecate and uses a security interest model, there is still a fundamental question: what happens to your collateral if the lending entity itself goes bankrupt?
In the BlockFills case, borrower collateral was held by the same operating entities that filed for Chapter 11. Their own counsel confirmed that all customer funds were treated as property of the estate. No structural separation between the platform's operating assets and customer collateral. None.
At APX Lending, we use a Special Purpose Vehicle (SPV) structure to add a layer of separation between our lending operations and the parent entity. For those unfamiliar with the term: an SPV is a separate legal entity created for a single, defined purpose. In our case, that purpose is to hold borrower collateral and enter into loan agreements. When a borrower enters into a loan with APX, the loan agreement is with a specific lending SPV (for example, APX Lending I Inc. or APX Lending II Inc.), not with the parent entity APX Inc. The borrower's collateral is held in a BitGo account that belongs to that specific SPV, segregated from APX Inc.'s own accounts and from the accounts of other SPVs. SPVs are well-established in traditional finance: banks use them in securitization, project finance companies use them to ring-fence infrastructure assets, and commercial mortgage lenders use them to isolate collateral pools from corporate credit risk.
BlockFills was a Cayman Islands-incorporated entity (Reliz Ltd.) operating out of Chicago. Its onboarding agreement reportedly told customers that deposits would be “completely segregated from the general balance sheet of the company.” Its own counsel contradicted that in open court. No securities regulator looking over their shoulder. No quarterly reporting requirements. No mandated audits of client asset segregation. No regulatory body to intervene before $75 million in losses turned into a full bankruptcy. That tells you a lot of what you need to know about Cayman-based lenders.
APX Lending operates under an entirely different model. In April 2025, the Canadian Securities Administrators (CSA), of the most stringent regulators in the world, granted APX Inc. exemptive relief, a first-of-its-kind decision for a crypto-backed lender in Canada. This was updated in March 2026 to expand our national capabilities to include USDC-denominated loans. We are also registered with FINTRAC in Canada and FinCEN in the United States, and maintain a SOC 2 compliance program.
A word on SOC 2, because most people hear the term without understanding what it means. SOC 2 stands for System and Organization Controls 2. It is an audit framework developed by the American Institute of Certified Public Accountants (AICPA) that evaluates a company’s internal controls across five areas: security, availability, processing integrity, confidentiality, and privacy. Most crypto lending platforms that have failed, including Celsius, BlockFi, and now BlockFills, never submitted themselves to this level of independent scrutiny.
What does regulation mean in practice? It means APX reports to the Ontario Securities Commission on a quarterly basis. Our operations, custody practices, and client asset segregation are subject to regulatory scrutiny, not on an honor system, but as a condition of our authorization to operate. If we fail to meet these obligations, the regulator has the authority to intervene. This is a fundamentally different accountability structure, with a regulator that is several orders of magnitude more mature and stringent than a Cayman Islands VASP’s or a company that simply self-certifies its compliance.
Regulation is not perfect. It does not eliminate all risk. But it creates a framework of oversight, accountability, and enforceable standards that has been conspicuously absent in every major crypto lending failure to date. Celsius was unregulated. FTX was offshore. BlockFi lacked meaningful lending-specific oversight. BlockFills operated through a Cayman entity. Other lenders that haven’t failed yet operate out of the same grey-zone offshore jurisdictions. The pattern speaks for itself.
How do you actually know your Bitcoin is where the lender says it is?
At APX Lending, every borrower’s collateral is held in dedicated, insured, segregated cold storage wallets with BitGo Trust, a licensed custodian. Each borrower can monitor their collateral on the blockchain, 24 hours a day, 7 days a week. The wallet address is visible in the borrower’s dashboard and online. This is not a periodic snapshot. It is continuous, real-time, on-chain verification.
Other platforms take a different approach. They group customer collateral into pooled accounts and rely on periodic third-party reserve attestations, sometimes biannually, sometimes more frequently, to demonstrate that client deposits and collateral are fully backed. These attestations are better than nothing. But they are inherently backward-looking. A reserve attestation confirms a snapshot in time. The moment after that snapshot is taken, the attestation is stale. Assets can be moved, rehypothecated, or commingled in the intervening period, and the borrower has no way of knowig until the next attestation snapshot!
In an industry where platforms have frozen withdrawals with little warning (as BlockFills did in February 2026, and as Celsius did in June 2022), the ability to independently verify your collateral’s existence on-chain, in real time, is not a luxury. It is a minimum standard of trust.
The crypto-backed lending market is projected to exceed $45 billion by 2030. As it grows, so does the responsibility of borrowers to understand what they are signing. Based on the failures we have seen, and on the structural differences I have outlined above, here is what I believe every borrower should demand:
1. Read your loan agreement, all of it. Understand whether the agreement creates a security interest (where you retain ownership) or a title transfer (where you give up ownership). If you see language about “full legal and beneficial ownership” transferring to the lender, understand what that means for your rights in a bankruptcy. If you don’t have time to read it, at least upload it into ChatGPT and ask it for a “summary of risks.”
2. Ask about rehypothecation. Does the lender reserve the right to lend out, pledge, or use your collateral? If so, understand that your collateral recovery depends not just on the lender’s solvency, but on the solvency of every counterparty the lender has exposed your assets to.
3. Understand the entity structure. Is your collateral held by the same operating entity that runs the business, pays employees, and takes on trading risk? Or is it held by a structurally separate, bankruptcy-remote SPV? This is not an abstract legal distinction; it is one of the single biggest factors determining whether your collateral survives a lender’s insolvency.
4. Know where your lender is domiciled and regulated. A Cayman Islands entity governed by Cayman law offers borrowers fundamentally different protections than a U.S. or Canadian entity regulated by securities commissions and subject to ongoing reporting. Borrowers should understand that their legal recourse in a dispute or bankruptcy may be limited and expensive when dealing with offshore domiciled lenders.
5. Verify your collateral independently. Can you see your collateral on-chain, in a segregated wallet, 24/7? Or are you relying on periodic attestations that may be weeks or months old? In an industry where withdrawal freezes can happen overnight, real-time verifiability matters.
6. Look at the liquidation LTV. At APX Lending, we offer a 90% liquidation threshold, meaning Bitcoin and Ethereum prices can drop significantly further than with most competitors’ before a borrower’s position is liquidated. In the volatile February 2026 crash, this wider buffer gave APX borrowers substantially more breathing room to manage their positions.
I founded APX Lending because I saw a gap that needed to be closed. After co-founding Coinberry and helping build one of Canada's first regulated crypto trading platforms, one thing became clear to me: crypto will not become part of mainstream finance until the platforms that serve it stop cutting corners on the things that actually matter. That means compliance. That means structural integrity. And it means borrowers should never have to accept risks that no serious, regulated financial institution would be allowed to impose on them.
BlockFills is the latest example of what happens when crypto lending operates without the guardrails that borrowers deserve. But it is not an anomaly. It is a pattern: commingled funds, opaque structures, absent regulation, and borrowers discovering too late that their collateral was never truly protected.
At APX Lending, we chose a harder path. We spent years working with Canadian securities regulators to secure CSA exemptive relief. We built a business framework that segregates borrower collateral from our operating entity. We hold collateral in dedicated cold storage wallets that borrowers can verify on-chain in real time. We do not rehypothecate. We report quarterly to the Ontario Securities Commission. We have had zero losses to date.
We did these things because we believe crypto-backed lending can and should be safe, secure, simple to access and ready for mass adoption. But that future will only arrive if borrowers start demanding the same standards they would expect from any traditional financial institution, and walk away from platforms that cannot meet them.
The next BlockFills is already out there. The question is whether you will be caught in it.
Andrei Poliakov is the Founder and CEO of APX Lending (www.apxlending.com), the first and only CSA-authorized crypto-backed lender in Canada. He is the co-founder of Coinberry, one of Canada’s earliest and largest regulated crypto trading platforms (acquired by WonderFi, TSX: WNDR), and was named one of the 50 Most Influential Canadians in Crypto and Blockchain in 2022.
Disclaimer: This article is for informational and educational purposes only and does not constitute legal, financial, investment, or tax advice. APX Lending does not provide investment or tax recommendations. Borrowers should consult qualified professionals and conduct their own due diligence before entering into any crypto-backed lending arrangement.
This article is for informational and educational purposes only and does not constitute legal, financial, investment, or tax advice. APX Lending does not provide investment or tax recommendations. Borrowers should consult qualified professionals and conduct their own due diligence before entering into any crypto-backed lending arrangement.
On March 15, 2026, BlockFills filed for Chapter 11 bankruptcy. A Chicago-based institutional crypto trading and lending firm, backed by Susquehanna and CME Group’s venture arm, serving 2,000 clients across 95 countries. Gone.
The filing revealed estimated assets of $50–100 million against liabilities of $100–500 million. Weeks before the filing, I was already hearing industry rumors that BlockFills was going under. Withdrawals had already been frozen. Lawsuits alleging commingling and misappropriation of client funds followed almost immediately.
At the first day hearing, BlockFills’ own counsel confirmed what borrowers feared most: customer funds had always been commingled with company funds. Bankruptcy proceedings would dictate that all of it was property of the estate. Borrowers who thought their collateral was safely held would now stand in line alongside every other unsecured creditor.
It was the same story replayed we all witnessed before – Celsius, FTX, BlockFi, Voyager. Every single time, the post-mortem reveals the same structural failures: unregulated entities, commingled funds, rehypothecated collateral, and borrowers left with nothing but a claim number in a bankruptcy proceeding.
The question is no longer whether this can happen again. It is whether you, the borrower, are going to keep giving your business to unregulated lenders and ignoring what the legal agreements you sign actually say about your rights.
BlockFills was not some fly-by-night operation. Founded in 2017. Over $61 billion in trading volume in 2025. SOC 2 Type II certified. On paper, it looked credible.
Beneath the surface, the story was different. BlockFills deployed a significant portion of its 2022 Series A proceeds into crypto mining hardware. Then mining profitability collapsed and the company lost roughly $30 million in that investment alone. On top of that it paid approximately $12 million in employee bonuses against just $900,000 in adjusted profits. Its balance sheet carried a deficit estimated at $77–80 million before the February 2026 crash even happened.
This tendency to pay exorbitant salaries using investor funds is a story a lot of people in this industry know all too well. It stands in stark contrast to my own policy: take no salary at the companies I run until they turn a profit. This was true at Coinberry. It is true here, at APX Lending.
When Bitcoin dropped below $61,000 in early February 2026, the house of cards collapsed. BlockFills froze deposits and withdrawals on February 2nd, privately at first, then publicly on February 6th. Reports emerged that the former CEO had allegedly urged certain clients to withdraw before the freeze. Dominion Capital filed suit alleging that BlockFills had used pooled customer assets for mining operations, equipment purchases, and settlements with other crypto firms.
The pattern is unmistakable. Celsius froze withdrawals in June 2022, then filed for bankruptcy a month later after using customer deposits to fund speculative trades. FTX collapsed in November 2022 when customer funds were funneled to Alameda Research. BlockFi followed within months. Now BlockFills joins the list.
In every case, the root causes are the same. The platform commingled customer assets with its own. In some cases, spent money on exorbitant salaries or expenses. Used assets for purposes borrowers never consented to. Operated outside meaningful regulatory oversight. And when the market turned, could not make customers whole.
Most borrowers never read the fine print. They compare interest rates and LTV ratios, deposit their Bitcoin, and assume their collateral is sitting safely in a wallet somewhere. That assumption can be catastrophically wrong. The difference is buried in the legal language of the loan agreement you sign.
I have built APX Lending from the ground up. I have personally reviewed the loan agreements of multiple competitors in this space. I can tell you that the legal treatment of your collateral varies dramatically between platforms. These differences are not superficial. They determine whether you get your Bitcoin back if the company you borrowed from goes under.
When you take out a mortgage on your home, the bank does not take ownership of your house. It holds a security interest, a lien, that gives it the right to foreclose if you default. But you remain the owner. Your name stays on the title. This is a foundational principle of secured lending that has existed for centuries.
At APX Lending, we built our loan agreements on this same principle. When a borrower pledges Bitcoin as collateral, APX takes a first-priority, perfected security interest, not ownership. In Canada, this security interest is perfected under the Ontario Personal Property Security Act (PPSA). In the United States, where APX operates through APX US LLC (a Delaware limited liability company), the security interest is perfected under the Uniform Commercial Code (UCC). These are established legal frameworks that ensure your collateral is held as your property, not as part of APX's general assets. In a worst-case scenario, this structure is what separates borrowers who can recover their collateral from borrowers who end up as unsecured creditors standing in line. Your Bitcoin remains your property. APX holds a lien, not a deed. Upon repayment, the collateral is returned and the security interest is discharged.
This is fundamentally different from what certain offshore or unregulated lending platforms do. Some agreements include language stating that “full legal and beneficial ownership of the Collateral will transfer to Lender when Borrower transfers such Collateral.” Which means that the moment you send your Bitcoin to the lender, it stops being yours. Legally, completely. What you get in return is not a secured claim against your own property. It is simply a promise that the lender will return “an equivalent amount” when the loan matures. Hopefully.
The distinction becomes critical in a bankruptcy. If the lender holds a security interest in your collateral (as APX does), the collateral is identifiable as your property, separable from the lender’s estate, and recoverable. If the lender took outright ownership via title transfer, your collateral is simply part of the bankrupt estate. You become an unsecured creditor. You stand in line behind secured creditors, behind administrative expenses, behind priority claims. Celsius borrowers learned this lesson. BlockFills borrowers are learning it now.
Even among platforms that use a security interest model, borrowers need to ask one critical question: does the lender reserve the right to rehypothecate your collateral? That means re-using, re-pledging, re-investing or lending out the Bitcoin you deposited.
Some platforms offer “standard” loan products where the lender explicitly reserves this right. Your collateral gets lent to institutional counterparties, pledged to funding partners, or otherwise deployed to generate additional revenue, sometimes to other hedge funds, prop trading desks, market makers, or lenders. In exchange, you might get a lower interest rate. Sounds like a reasonable trade-off on the surface. Until they cannot recover your collateral entirely!
Think about what that actually means. If your Bitcoin has been lent out to a third party and that third party defaults or becomes insolvent, your collateral will not be recoverable, even if the platform you borrowed from is still solvent. You have introduced a chain of counterparty risk that you never even knew about or had a chance to evaluate. The 2022 collapses of Celsius and Voyager were driven in large part by exactly this dynamic. Customer assets were re-invested into increasingly risky deals. When those failed, the collateral evaporated.
Some lenders go even further. Their agreements explicitly state that collateral “may be repledged, sold or otherwise transferred or used for Lender’s own account” without further consent from the borrower. And in a bankruptcy scenario, these same agreements warn borrowers that their collateral may not be recoverable and their claims could be treated as general unsecured claims. They’re telling you, in their own legal documents, that your Bitcoin might be gone. Most people just don’t read it.
At APX Lending, we do not rehypothecate borrower collateral. Period. This is not a marketing statement. It is a core part of the exemptive relief order granted to us by the Canadian Securities Administrators, confirmed in our loan agreements, and enforced through our regulatory reporting obligations. Your Bitcoin sits in segregated cold storage with BitGo, untouched, for the duration of your loan.
Even if a lender does not rehypothecate and uses a security interest model, there is still a fundamental question: what happens to your collateral if the lending entity itself goes bankrupt?
In the BlockFills case, borrower collateral was held by the same operating entities that filed for Chapter 11. Their own counsel confirmed that all customer funds were treated as property of the estate. No structural separation between the platform's operating assets and customer collateral. None.
At APX Lending, we use a Special Purpose Vehicle (SPV) structure to add a layer of separation between our lending operations and the parent entity. For those unfamiliar with the term: an SPV is a separate legal entity created for a single, defined purpose. In our case, that purpose is to hold borrower collateral and enter into loan agreements. When a borrower enters into a loan with APX, the loan agreement is with a specific lending SPV (for example, APX Lending I Inc. or APX Lending II Inc.), not with the parent entity APX Inc. The borrower's collateral is held in a BitGo account that belongs to that specific SPV, segregated from APX Inc.'s own accounts and from the accounts of other SPVs. SPVs are well-established in traditional finance: banks use them in securitization, project finance companies use them to ring-fence infrastructure assets, and commercial mortgage lenders use them to isolate collateral pools from corporate credit risk.
BlockFills was a Cayman Islands-incorporated entity (Reliz Ltd.) operating out of Chicago. Its onboarding agreement reportedly told customers that deposits would be “completely segregated from the general balance sheet of the company.” Its own counsel contradicted that in open court. No securities regulator looking over their shoulder. No quarterly reporting requirements. No mandated audits of client asset segregation. No regulatory body to intervene before $75 million in losses turned into a full bankruptcy. That tells you a lot of what you need to know about Cayman-based lenders.
APX Lending operates under an entirely different model. In April 2025, the Canadian Securities Administrators (CSA), of the most stringent regulators in the world, granted APX Inc. exemptive relief, a first-of-its-kind decision for a crypto-backed lender in Canada. This was updated in March 2026 to expand our national capabilities to include USDC-denominated loans. We are also registered with FINTRAC in Canada and FinCEN in the United States, and maintain a SOC 2 compliance program.
A word on SOC 2, because most people hear the term without understanding what it means. SOC 2 stands for System and Organization Controls 2. It is an audit framework developed by the American Institute of Certified Public Accountants (AICPA) that evaluates a company’s internal controls across five areas: security, availability, processing integrity, confidentiality, and privacy. Most crypto lending platforms that have failed, including Celsius, BlockFi, and now BlockFills, never submitted themselves to this level of independent scrutiny.
What does regulation mean in practice? It means APX reports to the Ontario Securities Commission on a quarterly basis. Our operations, custody practices, and client asset segregation are subject to regulatory scrutiny, not on an honor system, but as a condition of our authorization to operate. If we fail to meet these obligations, the regulator has the authority to intervene. This is a fundamentally different accountability structure, with a regulator that is several orders of magnitude more mature and stringent than a Cayman Islands VASP’s or a company that simply self-certifies its compliance.
Regulation is not perfect. It does not eliminate all risk. But it creates a framework of oversight, accountability, and enforceable standards that has been conspicuously absent in every major crypto lending failure to date. Celsius was unregulated. FTX was offshore. BlockFi lacked meaningful lending-specific oversight. BlockFills operated through a Cayman entity. Other lenders that haven’t failed yet operate out of the same grey-zone offshore jurisdictions. The pattern speaks for itself.
How do you actually know your Bitcoin is where the lender says it is?
At APX Lending, every borrower’s collateral is held in dedicated, insured, segregated cold storage wallets with BitGo Trust, a licensed custodian. Each borrower can monitor their collateral on the blockchain, 24 hours a day, 7 days a week. The wallet address is visible in the borrower’s dashboard and online. This is not a periodic snapshot. It is continuous, real-time, on-chain verification.
Other platforms take a different approach. They group customer collateral into pooled accounts and rely on periodic third-party reserve attestations, sometimes biannually, sometimes more frequently, to demonstrate that client deposits and collateral are fully backed. These attestations are better than nothing. But they are inherently backward-looking. A reserve attestation confirms a snapshot in time. The moment after that snapshot is taken, the attestation is stale. Assets can be moved, rehypothecated, or commingled in the intervening period, and the borrower has no way of knowig until the next attestation snapshot!
In an industry where platforms have frozen withdrawals with little warning (as BlockFills did in February 2026, and as Celsius did in June 2022), the ability to independently verify your collateral’s existence on-chain, in real time, is not a luxury. It is a minimum standard of trust.
The crypto-backed lending market is projected to exceed $45 billion by 2030. As it grows, so does the responsibility of borrowers to understand what they are signing. Based on the failures we have seen, and on the structural differences I have outlined above, here is what I believe every borrower should demand:
1. Read your loan agreement, all of it. Understand whether the agreement creates a security interest (where you retain ownership) or a title transfer (where you give up ownership). If you see language about “full legal and beneficial ownership” transferring to the lender, understand what that means for your rights in a bankruptcy. If you don’t have time to read it, at least upload it into ChatGPT and ask it for a “summary of risks.”
2. Ask about rehypothecation. Does the lender reserve the right to lend out, pledge, or use your collateral? If so, understand that your collateral recovery depends not just on the lender’s solvency, but on the solvency of every counterparty the lender has exposed your assets to.
3. Understand the entity structure. Is your collateral held by the same operating entity that runs the business, pays employees, and takes on trading risk? Or is it held by a structurally separate, bankruptcy-remote SPV? This is not an abstract legal distinction; it is one of the single biggest factors determining whether your collateral survives a lender’s insolvency.
4. Know where your lender is domiciled and regulated. A Cayman Islands entity governed by Cayman law offers borrowers fundamentally different protections than a U.S. or Canadian entity regulated by securities commissions and subject to ongoing reporting. Borrowers should understand that their legal recourse in a dispute or bankruptcy may be limited and expensive when dealing with offshore domiciled lenders.
5. Verify your collateral independently. Can you see your collateral on-chain, in a segregated wallet, 24/7? Or are you relying on periodic attestations that may be weeks or months old? In an industry where withdrawal freezes can happen overnight, real-time verifiability matters.
6. Look at the liquidation LTV. At APX Lending, we offer a 90% liquidation threshold, meaning Bitcoin and Ethereum prices can drop significantly further than with most competitors’ before a borrower’s position is liquidated. In the volatile February 2026 crash, this wider buffer gave APX borrowers substantially more breathing room to manage their positions.
I founded APX Lending because I saw a gap that needed to be closed. After co-founding Coinberry and helping build one of Canada's first regulated crypto trading platforms, one thing became clear to me: crypto will not become part of mainstream finance until the platforms that serve it stop cutting corners on the things that actually matter. That means compliance. That means structural integrity. And it means borrowers should never have to accept risks that no serious, regulated financial institution would be allowed to impose on them.
BlockFills is the latest example of what happens when crypto lending operates without the guardrails that borrowers deserve. But it is not an anomaly. It is a pattern: commingled funds, opaque structures, absent regulation, and borrowers discovering too late that their collateral was never truly protected.
At APX Lending, we chose a harder path. We spent years working with Canadian securities regulators to secure CSA exemptive relief. We built a business framework that segregates borrower collateral from our operating entity. We hold collateral in dedicated cold storage wallets that borrowers can verify on-chain in real time. We do not rehypothecate. We report quarterly to the Ontario Securities Commission. We have had zero losses to date.
We did these things because we believe crypto-backed lending can and should be safe, secure, simple to access and ready for mass adoption. But that future will only arrive if borrowers start demanding the same standards they would expect from any traditional financial institution, and walk away from platforms that cannot meet them.
The next BlockFills is already out there. The question is whether you will be caught in it.
Andrei Poliakov is the Founder and CEO of APX Lending (www.apxlending.com), the first and only CSA-authorized crypto-backed lender in Canada. He is the co-founder of Coinberry, one of Canada’s earliest and largest regulated crypto trading platforms (acquired by WonderFi, TSX: WNDR), and was named one of the 50 Most Influential Canadians in Crypto and Blockchain in 2022.
Disclaimer: This article is for informational and educational purposes only and does not constitute legal, financial, investment, or tax advice. APX Lending does not provide investment or tax recommendations. Borrowers should consult qualified professionals and conduct their own due diligence before entering into any crypto-backed lending arrangement.
This article is for informational and educational purposes only and does not constitute legal, financial, investment, or tax advice. APX Lending does not provide investment or tax recommendations. Borrowers should consult qualified professionals and conduct their own due diligence before entering into any crypto-backed lending arrangement.
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