What Happened to BlockFi (and What It Means for Your Crypto)

BlockFi was a crypto lending platform that froze customer withdrawals on November 10, 2022 and filed for Chapter 11 bankruptcy on November 28, 2022, taken down by the collapse of FTX and Alameda Research, the same firms that had bailed BlockFi out just months earlier.

If you had money on BlockFi when withdrawals stopped, you didn't lose access to your own coins. You became an unsecured creditor of a bankrupt company. That distinction is the whole story.

Who BlockFi was

BlockFi launched in 2017 as one of the friendlier faces of crypto lending. You deposited BTC or ETH, BlockFi paid you interest, and you could borrow cash against your crypto. At its peak it had over 100,000 customers. What most customers never saw was where the yield came from: BlockFi lent deposits out to hedge funds, trading desks, and other crypto firms. That works until one of those borrowers can't pay.

The contagion that reached BlockFi

It began with Terra/LUNA collapsing in May 2022, which wiped out Three Arrows Capital (3AC), ordered into liquidation on June 27, 2022 with losses over $4.2 billion. Voyager had lent 3AC more than $650 million, close to 60% of its loan book, and filed Chapter 11 on July 5, 2022. Celsius, paying outsized yields by rehypothecating deposits, paused withdrawals on June 13 and filed July 13 with a roughly $1.2 billion hole and about $4.7 billion owed.

The FTX rescue that became the kill shot

In June 2022, FTX extended BlockFi a $250 million revolving credit facility, later expanded toward $400 million plus a buyout option. BlockFi had also lent to Alameda against collateral heavy in FTT, FTX's own token. When FTX collapsed in November 2022, the rescue financing and the Alameda collateral evaporated together. BlockFi paused withdrawals November 10 and filed Chapter 11 on November 28, just 17 days after FTX. FTX was listed as its second-largest creditor.

The part that matters for you

In every one of these bankruptcies, customers who believed they owned their deposits found out they didn't. On January 4, 2023, a judge ruled the fine print in Celsius's Terms of Use had transferred ownership of Earn assets to Celsius, making roughly 600,000 account holders unsecured creditors. You deposit your crypto, and a clause you never read converts you from an owner into a creditor.

How a crypto-backed loan should work

The lesson isn't that borrowing against crypto is dangerous. It's that where your collateral sits, and who can touch it, decides whether you survive a shock.

When the October 2025 flash crash liquidated $19 billion across the market, Lantern didn't liquidate a single borrower.

At Lantern, we never lend out your collateral. It sits in BitGo's insured cold storage, coverage up to $250 million, under an OCC charter, and we share the wallet address so you can verify it. Bitcoin-backed loans start at 8%, funding lands within 24 hours, you get a 72-hour grace period, and 0% liquidation fees.

Borrow against your crypto here: https://lantern.finance/borrow

Educational purposes only, not financial advice.