Question 1 - Yes, report the interest income you earned despite the bankruptcy proceedings. In the future, you may need to amend your return depending on the outcome of the bankruptcy proceeding, but for now, just report the interest income.
Question 2 - No, unless there is a specific direction from the Bankruptcy Court regarding treating assets held in BlockFi accounts as sold, then do not report your cryptocurrency as sold. When the bankruptcy proceeding has concluded, you will know what you will receive as a creditor. You, and others similarly situated, may be unsecured creditors, therefore you are correct to state that there is no guarantee that you will actually get anything at the conclusion of the bankruptcy proceeding.
Here is some information copied from the U.S. Bankruptcy Court for the District of New Jersey website that relates to BlockFi. You may find this helpful, particularly the link that relates to obtaining docket and case information about the BlockFi bankruptcy.
BLOCKFI CLIENT QUESTIONS
The Debtor, BlockFi Inc., has established an email address devoted to answering questions and providing information to BlockFi clients. To the extent you have questions about your assets (including questions about transfers, BIAs, your BlockFi account or wallet), please submit your inquiry via email to: BlockFiInfo@ra.kroll.com
BLOCKFI DOCKET AND CASE INFORMATION
Use the following link to access the BlockFi bankruptcy docket and find information about the case.
https://restructuring.ra.kroll.com/blockfi/
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