BlockFi lent $275M to FTX — then followed it into bankruptcy

BlockFi, founded in 2017, was one of the large crypto lenders: customers deposited tokens into interest-bearing accounts, and the firm lent the assets on. At its peak the previous year it managed more than $15 billion in assets. In June 2022, with crypto markets in distress, BlockFi secured a $250 million rescue revolving credit line from FTX. Then FTX collapsed. On 11 November 2022 BlockFi paused withdrawals, and on 28 November it filed for Chapter 11 in the US Bankruptcy Court for the District of New Jersey in Trenton, case no. 22-19361.

The petition listed assets and liabilities each in the $1 billion to $10 billion range, more than 100,000 creditors, and roughly $257 million of cash on hand. The exposure ran both ways to the same name: BlockFi had lent $275 million to FTX US — making its rescuer's affiliate one of the largest claims in the filing — alongside exposure through collateralised loans to Alameda Research. And on top of the customer claims sat $30 million owed to the US Securities and Exchange Commission.

In the space of one month, BlockFi went from a lender holding a rescue credit line to a debtor with six figures of creditors. The interest paid to depositors was funded by lending their deposits to institutions — and when one of those institutions failed, the model failed with it.