BlockFi Bankruptcy and Bitcoin Custody Failures — CustodyStress

Documented Bitcoin custody cases associated with BlockFi in the Bitcoin Custody Incident Archive. BlockFi filed for bankruptcy in November 2022 following the FTX collapse, which triggered a liquidity crisis at the platform.

The most frequently documented recovery path in these cases is Bankruptcy Claims Process (2 of 2 cases). 50% of determinate cases resulted in some form of access recovery.

BlockFi was a cryptocurrency lending and interest platform founded in 2017. The platform offered interest-bearing accounts for deposited digital assets and provided loans collateralized by cryptocurrency. BlockFi had significant exposure to FTX, having received a $400 million credit facility from FTX US in 2022 following an earlier liquidity crisis. When FTX collapsed in November 2022, BlockFi's financial position became untenable. The platform paused withdrawals on November 10, 2022 and filed for Chapter 11 bankruptcy on November 28, 2022.

BlockFi operated as a custodial platform. Customers who deposited Bitcoin into BlockFi interest accounts transferred legal ownership to BlockFi in exchange for yield. The platform held customer assets commingled with its own assets. Customers held unsecured creditor claims against the estate rather than ownership of specific Bitcoin. BlockFi Wallet accounts, which did not pay interest, were structured differently and claimed to hold customer assets in a custodial capacity.

Access failed through the contagion mechanism of the FTX collapse. BlockFi's credit facility with FTX created a direct financial dependency — when FTX became insolvent, BlockFi's primary liquidity source was eliminated. The platform froze withdrawals before filing for bankruptcy. The bankruptcy process determined creditor recoveries, with interest account holders as unsecured creditors receiving partial distributions over the course of proceedings.

Archive cases involving BlockFi document individual access failures where holders could not withdraw Bitcoin during or after the bankruptcy. The archive does not attempt to document all BlockFi creditors.