Crypto financial services firm BlockFi is in the process of closing a down-round — in which funds will be raised at a lower valuation compared to previous raises — according to three sources with knowledge of the process.

BlockFi, which was reportedly raising funds at a valuation above $5 billion last year, provides one signal that the compression of valuations that have hit public markets for tokens and stocks is making its way to private markets. 

The firm, founded in 2017 by Zac Prince and Flori Marquez to offer uses a way to borrow funds against their crypto holdings, announced a $350 million raise at a $3 billion valuation in March 2021. At the time, the company touted breakneck growth metrics, such as a $10 billion loan book and 265,000 retail accounts. 

Sources say the new round will be led by venture investment firm Bain Capital Ventures with participation from DST and Valar.

“BlockFi does not comment on market rumors," a spokeswoman said, responding to a request for comment. 

BlockFi's down round represents a striking development in the industry for crypto services given the high degree of venture capital activity only months before. 

Over the last year, the market saw a wide range of companies secure valuations above $1 billion, including exchanges like Gemini and data providers like Dune Analytics. VC firms deployed $28.94 billion in 2021, according to data compiled by The Block Research. 

"Private valuations are being adjusted," one market participant said of the current environment for private crypto companies.

The round also comes months after BlockFi settled with the Securities and Exchange Commission (SEC) as well as state regulators in the US over its crypto savings product. BlockFi previously told The Block that it plans to offer its more than 600,000 users a similar product after it secures the requisite regulatory approvals.

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