BlockFi’s ‘Fugazi Bailout’ Condemns Crypto Lender to Bankruptcy

BlockFi has roughly 100,000 creditors with $1 billion to $10 billion in liabilities and assets

article-image

Blockworks exclusive art by axel rangel

share

Troubled lender BlockFi has filed for Chapter 11 bankruptcy protection, making it the next victim of FTX’s fallout.

Once one of the biggest and most rapidly growing startups in the cryptocurrency space, BlockFi has been struggling to keep afloat since the collapse of Three Arrows Capital and other crypto companies in May.

In July, competitor crypto lender Nexo offered to acquire BlockFi for an estimated $850 million. But that offer was turned down by the company in favor of a $400 million revolving credit offer from FTX US. 

Now, with FTX in shambles — facing legal and financial troubles of its own — BlockFi is once again left to fend for itself.

“As part of its restructuring efforts, the Company will focus on recovering all obligations owed to BlockFi by its counterparties,” the company said in a statement, adding, “the Company expects that recoveries from FTX will be delayed.”

A representative of BlockFi declined to comment further.

No surprise

BlockFi filing for bankruptcy should not come as a surprise, a source who has closely worked with BlockFi told Blockworks.

“[It] was obvious once FTX went bust, because they had a Fugazi bailout,” the source said.

This sentiment is shared by many in the crypto community. 

“There have been a lot [of] totally unexpected things that have happened in the crypto space over the past 2 months. BlockFi filing for bankruptcy is not one of those things,” Guy Turner from Coin Bureau tweeted.

Early signs of the crypto lender’s insolvency were apparent after it suspended withdrawals earlier this month amid FTX developments.

Its latest bankruptcy filings reveal that BlockFi has roughly 100,000 creditors with $1 billion to $10 billion in liabilities and assets. 

Among them is the Securities and Exchange Commission, which the now-bankrupt company is said to owe roughly $30 million.

In February, BlockFi reached a $100 million settlement with the SEC after it failed to register as a securities company and made misleading statements about its risk estimates on loan portfolios. 

Although BlockFi’s next steps are undetermined, activity on its platform has all been halted for the time being and its remaining $256.9 million at hand will be used to support its restructuring process.


Get the news in your inbox. Explore Blockworks newsletters:

Tags

Decoding crypto and the markets. Daily, with Byron Gilliam.

Upcoming Events

Javits Center North | 445 11th Ave

Tues - Thurs, March 24 - 26, 2026

Blockworks’ Digital Asset Summit (DAS) will feature conversations between the builders, allocators, and legislators who will shape the trajectory of the digital asset ecosystem in the US and abroad.

recent research

Unlocked by Template.png

Research

The march toward an interoperable and onchain-by-default internet depends on reliable messaging and value transfer across heterogeneous domains. Crosschain protocols now process >$1.3T in combined annual transfer volume and secure tens of millions of user interactions, yet no single design dominates.

article-image

The goal, per Santiago Santos, is to make crypto a relatable piece of tech for people who may not even understand it

article-image

Stripe stablecoin unit aims to operate under a federal charter enabling regulated stablecoin issuance and custody services

by Blockworks /
article-image

Will TradFi make crypto better or create more problems than it solves?

article-image

Subtle decisions by risk curators saved Aave from significant turmoil

article-image

The new Rootstock Institutional unit aims to connect professional investors to Bitcoin-native yield and liquidity strategies anchored in BTC’s security layer

by Blockworks /
article-image

DOJ files record civil forfeiture against more than 127,000 BTC linked to scam activity

by Blockworks /