Crypto Bankruptcies, Explained: A Plain-English Guide to Chapter 11 in Crypto
When a crypto company files for bankruptcy, the single most important question is narrow: which legal entity actually filed? In a Chapter 11 case, only the entity that files — the “debtor” — and its property are inside the case. A token, a network, an affiliate, or a successor company that did not file is not a debtor and is not automatically part of the proceeding. Get that one distinction right and most of the confusion around crypto bankruptcies disappears.
This guide is the map. It explains the process in plain terms and points to detailed pieces on the mechanics and on the industry’s best-known cases.
Why crypto bankruptcies get misread
Crypto projects are rarely a single company. There is often an operating company, a foundation, a token, a network of independent participants, and sometimes a later company that takes over the work. These are different things, frequently owned or controlled by different parties. When one of them files for bankruptcy, headlines tend to collapse all of them into a single name. That is how a filing by one operating company gets reported as “the whole project is bankrupt,” even when the network keeps running and the token was never a party to anything.
The discipline that fixes this is reading the filing itself: who is the debtor, what court, what chapter, what case number. Everything else follows from that.
The mechanics, in order
- A petition is filed. A specific legal entity files in a specific U.S. Bankruptcy Court. The filing names the debtor and gets a case number.
- The automatic stay begins. Filing triggers an automatic stay — a pause on collection efforts against the debtor and its property. Crucially, the stay protects the debtor; it does not reach out to sweep in affiliates who did not file.
- Chapter 11 or Chapter 7 — reorganize or liquidate. Chapter 11 is generally a reorganization: the business tries to restructure and continue or sell as a going concern. Chapter 7 is liquidation: assets are sold and the entity winds down. Some smaller companies use Subchapter V, a streamlined reorganization track for eligible small businesses.
- Creditors and the estate. The debtor’s assets form the “estate.” Creditors file claims. A plan (in Chapter 11) or a trustee (in Chapter 7) determines how the estate is handled.
- Resolution. The case ends in a confirmed plan, a conversion, a dismissal, or a wind-down.
None of these steps, by themselves, tell you anything about a separate company or a token that was never named as a debtor. That has to be checked, not assumed.
Start here
- The core mechanic: What happens when a crypto company files Chapter 11.
- Which chapter? Chapter 11 vs Chapter 7 vs Subchapter V.
- The big cases: FTX, Celsius, Genesis and Voyager, and BlockFi.
- A recent worked example: The MVMT Labs Chapter 11 filing, explained.
Frequently asked questions
What does “the debtor” mean in a crypto bankruptcy? The debtor is the specific legal entity that filed the bankruptcy petition. Only that entity and its property are inside the case. A related company, a foundation, a network, or a token that did not file is not a debtor and is not automatically part of the proceeding.
Does a crypto company’s bankruptcy shut down its token or network? Not automatically. A token or a network can be operated or governed by parties other than the company that filed. Whether anything changes for them depends on the facts of the specific case — which is why you read the filing rather than the headline.
What is the difference between Chapter 11 and Chapter 7? Chapter 11 is generally a reorganization aimed at continuing or selling the business; Chapter 7 is a liquidation that winds the entity down. Subchapter V is a streamlined Chapter 11 track for eligible small businesses.
Is this legal advice? No. This site explains how the process works in general terms. For any specific situation, consult a qualified professional.
By Jordan Feld. Last reviewed 2026-07-22. General information about the bankruptcy process, not legal or financial advice.