Seven Crypto Titans Went Bankrupt: It’s Truly a Horrible Year For Crypto Investors

Seven Crypto Titans Went Bankrupt: It’s Truly a Horrible Year For Crypto Investors

1 December 2022

The crypto sector has had a rough year. Retail and institutional investors are enduring a nightmare that appears to have no end: cascading bankruptcies of crypto companies and some star cryptocurrencies that used to give some hope for better times.

Add to this mess the drop in cryptocurrency prices. From a year ago, the crypto market has lost approximately $2.2 trillion.

It’s always the same story: “We’re OK. We are unconcerned. Don’t worry. We’re only slightly exposed. More capital is being deployed.” Later on, it’s “We have temporarily suspended and locked your money. We declared bankruptcy. It isn’t your fault” – one cryptocurrency investor protested on the social media platform Reddit.

“As soon as I hear ‘withdrawals are paused,’ I know I’ll never see that money again,” said another cryptocurrency investor.

“Withdrawals are paused” is analogous to politicians saying, “I’m retiring to spend more time with my family,” one user agreed.

Seven Major Players Left The Sector Since May

There have been seven big bankruptcies in the cryptocurrency business since May. Customers and investors in all of them are concerned about whether they will receive their money back.

It all started on May 9 when sibling cryptocurrencies Luna and UST, or TerraUSD, collapsed, losing at least $55 billion.

Luna, which was promoted by crypto enthusiasts like millionaire Mike Novogratz, crashed in value. The crash produced a credit crunch, which led to the failure of the hedge fund Three Arrows Capital, or 3AC, to which numerous crypto businesses had committed their clients’ money.

After that, the effect on the industry has been enormous: well-known cryptocurrencies such as Celsius Network and Voyager were forced to file for bankruptcy because they were exposed to Luna and UST through 3AC. BlockFi was also affected and forced to ask for help from cryptocurrency exchange FTX and its founder Sam Bankman-Fried.

Over three months later, FTX and its sister company Alameda Research filed for bankruptcy. BlockFi did the same, and there’s no doubt that other cryptocurrency companies will follow because Bankman-Fried saved many companies during last summer’s liquidity crisis, industry sources say.

Unfortunately, all of these bankruptcies have the same victims: investors who are unsure if they will be able to get back their investments. According to court documents, FTX’s top 50 creditors are owed more than $3 billion.

Investors are also frustrated since these organizations frequently promised everything was alright, only to block them from withdrawing their money a few days or even hours later by simply stopping withdrawals. On November 7, Bankman-Fried stated that FTX’s assets were “OK.” And then, total drama.

The next day, he revealed an arrangement to prevent his crypto enterprise from going bankrupt. However, as Changpeng Zhao, the CEO of Binance, a rival of FTX, revealed, the situation was awful. Binance had first agreed to purchase FTX before canceling the deal.

“At first, we hoped to be able to assist FTX’s clients in providing liquidity. However, the challenges are beyond our control or capacity to assist,” Binance stated on November 9.

Seven Crypto Titans Went Bankrupt: It’s Truly a Horrible Year For Crypto Investors

On November 14, BlockFi informed its consumers that its condition was not as terrible as had been imagined. Two weeks later, the organization declared bankruptcy under Chapter 11.

“I just lost one Bitcoin with them and am so angry. I’m lost on what to do.” One client complained on Reddit.

“I’m right there with you, brother. Time will tell how strongly certain corporations respect their debts to their customers. Just this week, I received my proof of claim from Celsius by chapter 11 case. I’ll be rooting for you.” Another investor joined in.

There are practically no safe havens for cryptocurrency investors right now. In addition to the possible loss of the money they had in the form of cryptocurrencies being put in accounts on these bankrupt companies, crypto prices have also dropped dramatically over the last year.

According to analytics firm CoinGecko, Bitcoin, the most popular cryptocurrency, is down 76% since its all-time high on November 10, 2021, at $69,044.77.

Ethereum, market capitalization’s second most valuable digital currency, has dropped 75% from it’s all-time high of $4,878.26. And what will happen next? We are sure to see it in the near future.

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