The cryptocurrency world is a rollercoaster ride, filled with high peaks of success and deep valleys of failure. Over the past decade, this volatile industry has seen numerous companies rise and fall, with some of the most notable names declaring bankruptcy.
This article delves into the history of major crypto bankruptcies and layoffs that have happened this year and in the year 2022, providing a comprehensive overview of the tumultuous journey of these companies.
Also Read: How to Navigate a Crypto Crash in 2023?
12 Major Crypto Layoffs and Bankruptcies in 2022 and 2023
#1. Genesis Global: The First Domino
Genesis Global, a crypto lending firm under the umbrella of Digital Currency Group (DCG), was one of the first to fall. The company filed for Chapter 11 bankruptcy protection, laying off 30% of its workforce, including two of its subsidiaries. The collapse of Genesis Global is a stark example of the industry-wide effects of the collapse of FTX.
The company had lent hundreds of millions of dollars to the trading firm Alameda Research, an FTX affiliate, contributing to its downfall. The bankruptcy and layoff of Genesis Global underscored the interconnectedness of the crypto industry, which can have a domino effect on other companies.
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#2. Celsius: A Financial Setback
Celsius Network, a large cryptocurrency lending platform, filed for bankruptcy protection in July 2023. The filing came about a month after Celsius paused all withdrawals, swaps, and transfers among customer accounts. In a filing with the U.S. Bankruptcy Court in New York, Celsius revealed that it owed roughly $1.2 billion more than it had on hand, highlighting the financial challenges faced by the company.
Related: Celsius Creditors Now Seek to Unmask “Suspicious” FTX Crypto Trades
#3. Crypto.com: A Double Blow
Crypto.com, a Singapore-based exchange, had to reduce a fifth of its global personnel in its second round of layoffs within six months. The abrupt disconnection from business networks and online meetings led some employees to discover they had been laid off. The company also mishandled about $400 million in transactions, aggravating its problems.
#4. Blockchain.com: Downsizing
Blockchain.com, a cryptocurrency brokerage, announced that it was laying off 110 people, or 28% of its workforce. This followed the company’s decision to close its headquarters in Argentina and lay off an additional 150 employees. The layoffs at Blockchain.com showed market volatility and the need to improve planning and management.
#5. Digital Currency Group: Closing Doors
The cryptocurrency conglomerate, Digital Currency Group, announced the closure of its HQ, a relatively recent addition to Barry Silbert’s Holdings, a wealth management company. Other businesses owned by Digital Currency Group include CoinDesk, Grayscale Investments, and Genesis Global. The closure of HQ and the layoffs highlighted the challenges that crypto conglomerates face in maintaining their diverse operations.
#6. BlockFi: Regulatory Action
BlockFi, a cryptocurrency lending and borrowing company, faced a major blow when the state of New Jersey filed a regulatory action against it. The lawsuit alleged that BlockFi issued unregistered securities and charged illegal interest rates.
The legal troubles and layoffs at BlockFi underscored the regulatory challenges that crypto lending and borrowing companies face and the need for better compliance with securities laws.
Related: Cryptocurrency Regulations Worldwide
#7. ConsenSys: Restructuring
ConsenSys, a blockchain development company founded by Ethereum co-founder Joseph Lubin, announced a massive restructuring that included layoffs and a focus shift to more lucrative commercial areas. The restructuring at ConsenSys showed how difficult it can be for blockchain firms to handle business operations and create strategies for long-term success.
#8. BitGo: Legal Troubles
BitGo, a cryptocurrency custody and security company, faced a lawsuit from a former employee accusing them of discrimination and harassment. The lawsuit and the layoffs at BitGo underscored crypto companies’ challenges in maintaining a positive work environment and the need for better HR policies and procedures.
#9. FTX: A Major Liquidity Crisis
FTX, a prominent crypto exchange, suffered a major liquidity crisis in November 2022, leading to a filing for Chapter 11 bankruptcy. The company’s downfall was a significant event in the crypto industry, demonstrating the potential risks associated with the volatile crypto market. The failure of FTX had a ripple effect on other companies, such as Genesis Global, leading to a series of layoffs and bankruptcies in the industry.
#10. Voyager Digital: A Sudden Bankruptcy
Voyager Digital, a major crypto trading platform, declared bankruptcy in July 2022. The company’s sudden downfall left its customers uncertain, as it held $1.3 billion in customer crypto assets on its platform when it declared bankruptcy. The company assured that all the U.S. dollar deposits would be returned to customers, but it was unclear how much of their crypto holdings would be returned.
#11. Core Scientific: A Mining Disaster
Core Scientific (CORZ), a Nasdaq-listed mining company, filed for Chapter 11 bankruptcy in December 2022. The company’s bankruptcy highlighted crypto mining companies’ struggles in the volatile crypto market. The downfall of Core Scientific was a significant event in the crypto industry, demonstrating the potential risks associated with crypto mining operations.
#12. Alameda Research: A Trading Fiasco
Alameda Research, a trading firm affiliated with FTX, faced a significant setback when Genesis Global, a crypto lending company, went bankrupt after lending hundreds of millions of dollars to Alameda. The incident highlighted the industry’s connectedness and the potential risks associated with lending operations in the volatile crypto market.
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The Reasons Behind the Failures
Several factors contributed to the demise of these cryptocurrency enterprises, including market volatility, legal constraints, technological difficulties, and competition from new market participants.
Many of these businesses had seen rapid growth and operational expansion without a defined growth and profitability strategy. Some had also engaged in dubious business practices, such as offering unregistered securities to investors, leading to legal troubles and damage to their reputations.
The Aftermath: What Happens When a Crypto Exchange Goes Bankrupt?
When a crypto company goes bankrupt, investors feel the repercussions. The bankruptcies of Voyager Digital and Celsius Network alone resulted in investor losses of more than $1 billion. Voyager, which filed for Chapter 11 bankruptcy protection on July 1, 2022, held $1.3 billion in customer crypto assets on its platform at the time of the bankruptcy filing.
Celsius Network, a large cryptocurrency lending platform, filed for bankruptcy protection on July 13, 2022, owing about $1.2 billion more than it had at the time. It’s important to note that the Federal Deposit Insurance Corporation (FDIC) does not insure cryptocurrency holdings.
Frequently Asked Questions
What Can I Do to Protect My Investments in the Event of a Crypto Company’s Bankruptcy?
In order to protect your investments, it’s crucial to diversify your portfolio and avoid putting all your eggs in one basket. Also, consider keeping your cryptocurrencies in a private wallet rather than on an exchange. This way, you can control your assets even if the exchange goes bankrupt. Always do your due diligence before investing in any crypto company, and stay updated with the latest news about the company and the industry.
How Can You Tell if a Crypto Company Is About to Go Bankrupt?
Some warning signs might include sudden changes in the company’s leadership, layoffs, legal troubles, or regulatory actions against the company. Also, if a company starts to limit withdrawals or if there are significant delays in processing transactions, it could be a sign of financial trouble. However, these signs are not definitive, and a company could still go bankrupt without any of these warning signs.
How Can I Stay Updated About the Financial Health of a Crypto Company?
You can stay updated about the financial health of a crypto company by following news about the company and the industry, reading the company’s annual reports if they are available, and participating in online forums and communities where people discuss these companies. Following the company’s social media accounts and official announcements is also good.