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

Upcoming Events

Old Billingsgate

Mon - Wed, October 13 - 15, 2025

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.

Industry City | Brooklyn, NY

TUES - THURS, JUNE 24 - 26, 2025

Permissionless IV serves as the definitive gathering for crypto’s technical founders, developers, and builders to come together and create the future.If you’re ready to shape the future of crypto, Permissionless IV is where it happens.

Brooklyn, NY

SUN - MON, JUN. 22 - 23, 2025

Blockworks and Cracked Labs are teaming up for the third installment of the Permissionless Hackathon, happening June 22–23, 2025 in Brooklyn, NY. This is a 36-hour IRL builder sprint where developers, designers, and creatives ship real projects solving real problems across […]

recent research

Featured.png

Research

Helium stands at a pivotal moment in its evolution as a decentralized wireless network, balancing rapid growth, economic restructuring, and global expansion. With accelerated growth in domestic DAUs and Hotspots supporting its network, Helium is leveraging strategic partnerships and innovative proposals to scale internationally. The recent implementation of HIP 138, “Return to HNT,” has unified its token economy under HNT, simplifying participation and strengthening liquidity, while HIP 139’s phase-out of CBRS refocuses efforts on scalable Wi-Fi offload. Meanwhile, governance shifts under HIP 141 raise questions about centralization as Nova Labs consolidates control over the roadmap.

article-image

“Be prepared to do more with less,” Framework Ventures’ Michael Anderson said

article-image

Q1 may have been “frustrating,” but things are looking brighter for Q2

article-image

Tokens worth 20% of the current supply of the TRUMP memecoin launched by the president are set to be unlocked tomorrow

article-image

A crypto-industry lawsuit is “moot” now that Joint Resolution 25 has been signed into law

article-image

Fed Chair Powell assured markets that the labor market is in “good place,” dependent on price stability

article-image

As uncertainty reigns, the Philly Fed manufacturing index fell to a multi-year low, but layoffs have slowed