Factbox: Crypto Companies Go Bankrupt

Dec 1 (Reuters) – 2022 has been a tough year for the crypto industry. The price of bitcoin has fallen 65% since the start of the year, the cryptocurrency Luna has suffered a total collapse in its value and the crypto exchange FTX has gone from buying Super Bowl ads to a sudden collapse of bankruptcy.

Here are the top crypto companies that went bankrupt in 2022.

FTX

The FTX implosion was the biggest and most dramatic fall for crypto in 2022 so far. The Bahamas-based exchange started the year with a $32 billion valuation, hired celebrities such as Larry David and Tom Brady for flashy Super Bowl commercials and put its name to the Miami Heat arena of the NBA. FTX, which said it has more than a million users, has positioned itself as a “white knight” that could save other crypto firms amid market turmoil earlier this year.

But in November, FTX filed for bankruptcy after a week in which a potential merger with rival crypto exchange Binance fell through as FTX founder Sam Bankman-Fried dealt with allegations that he routed deposits from customers to FTX’s affiliate trading firm, Alameda Research, and the exchange suffered pullbacks. of around $6 billion in just 72 hours. Bankman-Fried said he was “deeply sorry for what happened” and acknowledged a “massive failure of risk management oversight”, but said he had not intentionally mixed the FTX user deposits with Alameda trading activity.

John Ray, the new CEO appointed to oversee FTX’s bankruptcy, said he had never seen “such a complete failure of corporate controls” – and Ray was the executive tasked with cleaning up Enron’s debts following his early 2000s accounting fraud scandal.

BLOCFI

Crypto lender BlockFi was the first crypto company to follow FTX into bankruptcy, filing Chapter 11 about two weeks after FTX collapsed.

BlockFi had several ties to FTX, and it had relied on a $400 million FTX credit facility to stay afloat after competing crypto lenders Voyager Digital Ltd and Celsius Network went bankrupt following the turmoil of the market in early 2022.

BlockFi has previously said it has 450,000 users and intends to ask a bankruptcy judge to allow some of them to withdraw funds. Users who could withdraw funds have interest-free BlockFi Wallet accounts, which BlockFi created earlier this year as part of a $100 million settlement with the U.S. Securities and Exchange Commission.

THE CAPITAL OF THE THREE ARROWS

Crypto hedge fund Three Arrows Capital (3AC) was the first major crypto firm to fail in 2022, knocked down by the collapse of cryptocurrencies Luna and TerraUSD in May. These meltdowns rocked crypto markets around the world, wiped out $42 billion in value for investors, and led to an arrest warrant in South Korea against cryptocurrency developers.

Singapore-based 3AC, which reportedly had $10 billion in cryptocurrency earlier in 2022, began bankruptcy proceedings in the British Virgin Islands in June.

Professionals overseeing the liquidation of 3AC said its founders fled overseas and are not cooperating with asset recovery efforts for creditors.

DIGITAL TRAVELER

Voyager, a New Jersey-based crypto lender, filed for bankruptcy in July in the United States after 3AC defaulted on a crypto loan worth over $650 million.

Voyager had hoped to quickly move its bankruptcy through the US court system, after reaching a deal in September to sell its assets for $1.4 billion in crypto to FTX.

The proposed sale fell through following the FTX implosion, and Voyager reopened talks with other potential buyers, including crypto exchange Binance.

CELSIUS NETWORK

Another crypto lender knocked down by the collapse of Terra and Luna, Celsius Network began its bankruptcy filing in the United States in July on more difficult grounds than Voyager.

Since then, Celsius has been embroiled in disputes over fraud investigations, inconsistent handling of customer accounts, customer privacy, and its spending on a new bitcoin mining facility.

Celsius’ bankruptcy judge appointed an examiner to determine whether Celsius was operating as a Ponzi scheme and to thoroughly examine the company’s finances. Celsius said he welcomes an independent review, but he expressed concern about the duplication of investigations by his creditors, state securities regulators and the bankruptcy examiner.

Reporting by Dietrich Knauth in New York Editing by Noeleen Walder, Alexia Garamfalvi and Matthew Lewis

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