Here Are The Notable Crypto Fallouts Over The Last Two Years

Author: Khyathi Dalal | October 14, 2023 06:04pm

As 2023 is almost ending, we're recapping some of the major crypto disasters of the last two years.

With all of the regulatory changes that the crypto landscape is witnessing, 2024 is likely to see a stronger framework for companies. However, U.S. markets appear to be seeing a dull phase, with many companies looking to Asian countries and elsewhere to begin operations due to ease of doing business and a clarity in regulations. U.S.-based crypto exchange Coinbase (NASDAQ:COIN) opened a business in Bermuda, while Gemini has been looking for a license in UAE and Seattle-based exchange Bittrex closed its U.S. operations.

Below are a few highlights from this year: 

• Binance (CRYPTO: BUSD), one of the world’s largest crypto trading platforms, and its founder, CEO Changpeng Zhao, came under SEC scrutiny for mishandling investors' assets, lying to regulators and violating a number of securities laws in June 2023. However, the exchange has disputed the allegations.
• The collapse of Sam Bankman-Fried’s crypto exchange FTX was the result of a liquidity crisis surrounding the company's token, FTT, and its trading firm, Alameda Research Company. Bankman moved up to $10 billion in FTX customer funds to Alameda, whose assets were primarily held in the FTT token. Mismanagement of funds, lack of liquidity and the large volume of withdrawals led to the FTX collapse. Currently, SBF is on trial for orchestrating one of the largest frauds in history.

Read Next: Crypto Markets Worst Hit in Nine Months, Positive September Sets Bullish Course for October

• Crypto lender Celsius (CRYPTO: CEL) filed for bankruptcy in July 2022 and its CEO Alex Mashinsky resigned as CEO in September 2022 after the SEC arrested him on charges of fraud and accusations of manipulating the CEL token price. However, Mashinsky was released on a $40 million bond. The court also froze his banking and real estate assets. Celsius reached a $4.7 billion settlement with the U.S. over fraud allegations and said this would not affect reorganization plans. Currently, the bankrupt Celsius’ creditors have approved a reorganization plan that would return 67%-85% of holdings to them.

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• In November 2022, BlockFi filed for Chapter 11 bankruptcy protection, owing up to $10 billion to over 100,000 creditors. It also listed an outstanding $275 million loan to FTX US, the American arm of SBF's collapsed company. Blockfi’s Bermuda subsidiary also filed for bankruptcy. 
• In January 2023, Coinbase reached a $100 million settlement with New York regulators. The exchange paid a $50 million fine for allowing customers to open accounts with limited background checks and spent $50 million to improve its compliance. The crypto exchange also laid off employees to cut costs amid falling crypto markets.
• Crypto lender Genesis filed for bankruptcy in January 2023 as its parent company Digital Currency Group is struggling with liquidity issues. Genesis' filing shows more than 100,000 creditors and liabilities of up to $11 billion. Both its lending arms, Genesis Global Capital and Genesis Asia Pacific, also filed voluntary petitions for relief under Chapter 11 of the U.S. Bankruptcy Code. Gemini, its lending partner, was also impacted by the fallout, as Genesis owes Gemini more than $900 million.
• Three Arrows Capital (3AC), a hedge fund, failed to meet margin calls from its lenders, thus heading into bankruptcy. The fall can be traced back to the collapse of TerraUSD in May and a sharp sell-off in the crypto markets. The fund had significant leverage on long positions across various cryptocurrencies and related derivatives.  

Read More: Founder Of Crypto Hedge Fund 'Three Arrows Capital' Is Arrested

Benzinga's Future of Digital Assets conference is scheduled for Nov. 14. Attend and learn more about crypto companies and their fallouts. The gathering is seen as pivotal for the digital assets community. The event will spotlight the latest trends, innovations, and challenges in the digital asset realm.

Photo: Shutterstock

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