It’s been a bad year for crypto. It was even worse for these guys
From the brash but supposedly visionary CEO to the superstar trader who never seems to sleep, crypto, like other high-flying industries, is full of hotshots.
But when millions — or billions — of dollars are at stake, a bright star can fade as quickly as it appeared.
Here are five prominent sins that rocked the crypto world in 2022.
SBF
Once hailed as the “white knight” of the crypto world, the former FTX CEO is now under house arrest at his parents’ home in Palo Alto, California, after posting a whopping $250 million bail following his extradition from the Bahamas US dollars released.
After some time at Wall Street trading firm Jane Street, Sam Bankman-Fried and his co-founders formed crypto trading firm Alameda Research. SBF then founded FTX, a cryptocurrency exchange that grew to become one of the largest in the world.
But SBF, known as one of the greatest proponents of effective altruism, which advocates doing what is best for most people, may not have been as benevolent as he seemed. In December, Bankman-Fried was indicted on eight counts, including securities fraud, wire fraud and multiple counts of conspiracy involving money laundering and campaign finance violations.
Do kwon
Woohae Cho—Bloomberg/Getty Images
Brash, blasphemous CEOs are not uncommon in the tech industry. But most of them aren’t responsible for the $40 billion meltdown either.
South Korean founder of Terraform Labs, Do Kwon, is now wanted by Interpol and South Korean authorities. Kwon created the algorithmic stablecoin TerraUSD, which has been hailed by some as an essential tool for the growth of the crypto industry.
The stablecoin maintained its 1:1 peg to the US dollar through a delicate balancing act with another Terraform Labs token, Luna. Luna’s value rose to $40 billion before a bank run brought down both cryptocurrencies.
Kwon was so confident – or so infatuated – that he shrugged off any criticism of TerraUSD and Luna, saying, “I don’t discuss the poor.” Although sometimes he still is online active– He recently appeared on crypto influencer Cobie’s livestream podcast Only up– His real whereabouts are unknown. South Korea’s Yonhap News Agency reported December 12 that he may be in Serbia.
Su Zhu and Kyle Davies
The founders of Three Arrows Capital, Su Zhu and Kyle Davies, were the genius investors of the crypto world – until they weren’t anymore.
Through a series of speculative investments using borrowed money, the two created one of the most successful crypto hedge funds. But after a misguided bet on Grayscale Bitcoin Trust and a $200 million investment in Luna that later collapsed, the firm went under.
Though the crypto hedge fund claimed it had no “outside investors,” its financial implosion resulted in billions of dollars in claims from creditors.
The crypto bigwigs were once the epitome of a wave of new money emanating from the crypto industry, and they sought to prove it by purchasing a $50 million superyacht called Much wowwhich had to be put up for sale again after Zhu and Davies failed to make their final payment.
Alex Maschinsky
Bruno de Carvalho—SOPA Images/Sipa USA/Reuters
Former Celsius CEO Alex Mashinsky ran the cryptocurrency bank as it touted annual returns of up to 18% for customers opening savings accounts. It seemed too good to be true. And it was.
Celsius filed for bankruptcy in July after becoming one of the first major crypto companies to freeze customer withdrawals. Mashinsky was reportedly in charge of the company’s investment strategy and made a series of bad bets, including excessive leverage and a roughly $125 million investment in the Grayscale Bitcoin Trust, which is down nearly 80% this year, according to Reuters .
Last year, the company had 1 million customers and around $20 billion in assets under management. In bankruptcy filings, the company claimed it owed customers more than $4.7 billion.
It’s unclear if Celsius customers will get back the money they invested, which for some was their total savings. Months after the company filed for bankruptcy, Mashinsky resigned as CEO, claiming he had “become an increasing distraction.”
Stefan Ehrlich
Brendan McDermid – Reuters
At its peak, Stephen Ehrlich’s Voyager Digital was promoting double-digit returns with the help of celebrity advocates like Mark Cuban.
Ehrlich and the company ran into trouble earlier this year when crypto hedge fund Three Arrows Capital failed to pay the more than $665 million it owed the company.
After building a mass of 3.5 million customers at its peak, Voyager Digital filed for bankruptcy in July.
The company almost sold its assets to FTX for about $1.4 billion, but after the latter imploded last month, Voyager was looking for a new buyer. It now appears that Binance’s US arm will buy Voyager’s assets for around $1 billion.
Still, Ehrlich could end up better off than most of Voyager’s post-bankruptcy customers. He reportedly made millions selling Voyager stock during its peak in February and March 2021.
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