Crypto Taxes
Expert verified
5 min read

Are Crypto Losses on FTX and BlockFi a Tax Write Off?

Are Crypto Losses on FTX and BlockFi a Tax Write Off?
Are Crypto Losses on FTX and BlockFi a Tax Write Off?
Our Editorial Standards:
Our content is designed to educate the 500,000+ crypto investors who use the CoinLedger platform. Though our articles are for informational purposes only, they are written in accordance with the latest guidelines from tax agencies around the world and reviewed by certified tax professionals before publication. Learn More
on this page

Did you lose access to cryptocurrency held on FTX or BlockFi? 

It’s possible that you could write off the value of your lost cryptocurrency and save thousands of dollars on your tax return. 

In this guide, we’ll break down everything you need to know about how lost cryptocurrency from an exchange bankruptcy should be reported on your tax return. 

What’s happening to FTX? 

FTX is the parent company of FTX.US. At its peak, FTX was the world’s second largest exchange by volume. The company had close ties to BlockFi and was set to acquire the platform in June 2023. 

After reports of liquidity issues and mismanagement of customer funds in November 2022, FTX and BlockFi halted customer withdrawals. 

On November 11, 2022, FTX officially filed for bankruptcy, causing the values of cryptocurrencies like Bitcoin and Ethereum to plummet. 

Will I regain access to my cryptocurrency? 

At this time, it’s unclear whether FTX and BlockFi customers will regain access to their cryptocurrency. It may take months or even years for customers to get a definitive answer to this question. 

Who receives funds in a company bankruptcy? 

It’s important to remember that bankruptcy proceedings are often a long, complicated process that can take years to sort out. 

When a company files for bankruptcy, creditors take control of the company. At that point, they must decide whether to liquidate the company or ‘restructure’ to maximize customer value. 

In the case of a liquidation, an exchange’s funds will be redistributed to its creditors. Given the size of the hole in FTX’s balance sheet—assets on hand vs. liabilities owed—it’s highly unlikely creditors will be made whole. 

FTX and BlockFi retail customers are likely to be considered ‘unsecured creditors’ in the bankruptcy proceedings. As an unsecured creditor, you may get paid out on asset liquidation after other creditors who may be higher in the liquidation order based on contracts and/or agreements with FTX and BlockFi.

Can I write off my crypto losses if I lose access to my crypto? 

Many tax professionals argue that in the case you lose access to your crypto permanently due to exchange bankruptcy, you can write off the value of your lost crypto as an ‘investment loss’ and deem the assets worthless. By doing so, you are relinquishing your rights to claim the assets in the future. 

Investment losses can offset your capital gains and up to $3,000 of ordinary income for the year. Additional losses can be rolled forward into future tax years. 

However, given that FTX and BlockFi investors don’t currently know whether they will receive their investment back, or to what extent, it’s unclear what portion of their investment is completely and permanently ‘lost’. You should consult a crypto tax professional with questions on the specifics of your situation.

Another option is to treat cryptocurrency lost to exchange bankruptcy as a casualty loss. However, these types of losses are considered non-deductible after the Tax Cuts & Jobs Act of 2017. 

For more information, check out our guide to lost & stolen cryptocurrency

How do I report my cryptocurrency taxes?

If you’re looking for an easy way to report your cryptocurrency taxes, CoinLedger can help. CoinLedger automatically integrates with FTX, FTX.US, BlockFi and other exchanges and blockchains to help you report your taxes in minutes. 

Get started today with the crypto tax software trusted by 500,000 investors across the globe. 

Get started with a free preview report today.  

Frequently asked questions

  • MinuPlus
  • MinuPlus
  • MinuPlus
  • MinuPlus
  • MinuPlus
  • MinuPlus
Want to try CoinLedger for free? Claim your free preview tax report.

Join 500,000 people instantly calculating their crypto taxes with CoinLedger.

How we reviewed this article

Edited By

All CoinLedger articles go through a rigorous review process before publication. Learn more about the CoinLedger Editorial Process.

CoinLedger has strict sourcing guidelines for our content. Our content is based on direct interviews with tax experts, guidance from tax agencies, and articles from reputable news outlets.


Demystify Crypto Taxes

The Ultimate Crypto Tax Guide (2024)

This guide breaks down everything you need to know about cryptocurrency taxes, from the high level tax implications to the actual crypto tax forms you need to fill out.

Crypto taxes overview
Crypto Tax Rates 2024: Complete Breakdown

Here’s how much tax you'll be paying on your income from Bitcoin, Ethereum, and other cryptocurrencies.

Crypto tax rates
How Crypto Losses Can Reduce Your Taxes

Crypto and bitcoin losses need to be reported on your taxes. However, they can also save you money.

How crypto losses lower your taxes

Calculate Your Crypto Taxes

  • Check
    No credit card needed
  • Check
    Instant tax forms
  • Check
    No obligations
Get Started For Free
Jump to