BlockFi filed for Chapter 11 as FTX exposure became a liquidity crisis

BlockFi Inc. and eight affiliated companies filed voluntary Chapter 11 petitions in the U.S. Bankruptcy Court for the District of New Jersey on November 28, 2022. The filings turned the collapse of FTX from a counterparty problem into a formal insolvency proceeding for one of the cryptocurrency industry’s prominent lenders.

The central fact is established by the court-stamped petition and the declaration filed by Mark Renzi, managing director at Berkeley Research Group and proposed financial adviser to the debtors. Renzi attributed BlockFi’s severe liquidity shortage substantially to its relationships with FTX US, Alameda Research and the FTX trading platform. That attribution was the debtors’ contemporaneous account, submitted under penalty of perjury, rather than an independent judicial finding.

A rescue became another exposure

BlockFi had already been damaged by the failures that moved through crypto credit markets during 2022. Renzi’s declaration said Three Arrows Capital had been one of BlockFi’s largest borrowers and that its collapse, together with losses involving other borrowers, produced material losses and customer withdrawals.

BlockFi then accepted a transaction under which FTX US committed to lend as much as $400 million in cryptocurrency on a junior basis to client obligations. FTX US also received an option to acquire BlockFi. According to the declaration, 89% of voting BlockFi shareholders supported the transaction. These figures describe the contractual commitment and shareholder vote; they do not establish that the entire $400 million facility was funded.

The arrangement initially supplied confidence and liquidity, but it also tightened the connection between the two businesses. BlockFi had separately lent digital assets—primarily bitcoin and ether—and dollar-denominated stablecoins to Alameda Research. BlockFi also used FTX for trading and held cryptocurrency on the platform.

After FTX began bankruptcy proceedings on November 11, 2022, those positions could not function as ordinary liquid resources. Renzi said an additional borrowing request under the FTX agreement was not honored, cryptocurrencies held on FTX became trapped, and Alameda defaulted on approximately $680 million of collateralized loan obligations. The declaration explicitly described recovery on those loans as unknown.

Withdrawals had already stopped

BlockFi limited platform activity and paused customer withdrawals on November 10, 2022. By November 28, the company had concluded that it could not restore liquidity without a court-supervised process.

Before filing, BlockFi liquidated some of its own cryptocurrency. The declaration reported that these sales raised $238.6 million, producing an unencumbered cash position of $256.5 million on the petition date. Management said it expected that cash to fund the Chapter 11 cases and was not requesting debtor-in-possession financing at that stage.

Those cash figures were management-supplied petition-date amounts. They did not measure the value of customer claims, eventual recoveries or the net value of assets that might be recovered from FTX and Alameda. Chapter 11 also did not itself determine ownership of assets associated with BlockFi’s different account products.

Why the filing mattered

The November 28 filings showed how concentrated counterparty relationships could transmit distress across nominally separate crypto companies. FTX had been presented as a source of emergency liquidity after the earlier credit failures. Its collapse instead impaired BlockFi’s lender, borrower, trading and custody relationships at nearly the same time.

That made BlockFi’s bankruptcy an institutional event, not simply a token-price story. It exposed the difficulty customers and creditors faced when assessing off-chain loans, rehypothecation rights, collateral quality and dependencies among private companies. The documents establish the filing and BlockFi’s explanation for it, but they do not prove that every asserted obligation was collectible or fix a recovery percentage.

No cryptocurrency price move is attributed to the filing in this reconstruction. Digital assets traded continuously across venues, and a defensible event-day return would require a specified instrument, exchange, quote currency and UTC measurement window. The more durable November 28 record is the court proceeding itself and the disclosed failure of a rescue relationship that had been intended to contain the 2022 crypto-credit crisis.