The Most Significant Crypto Bankruptcy Cases
The cryptocurrency industry has been a hotbed of innovation and growth in recent years. However, the industry's rapid expansion has also led to several high-profile bankruptcies. In this article, we will take a closer look at some of the most significant bankruptcy cases in the crypto industry (listed in reverse chronological order):
Genesis Global Capital
One of the largest crypto lenders, Genesis froze customer redemptions in November 2022 after major exchange FTX declared bankruptcy. The company is owned by Digital Currency Group, a U.S. venture capital firm. Genesis Global Holdco, the parent company of Genesis Global Capital, and another lending unit, Genesis Asia Pacific, also filed for bankruptcy protection.
In late November 2022, crypto lender BlockFi filed for Chapter 11, two weeks after FTX's collapse. BlockFi claimed that its substantial exposure to FTX had created a liquidity crisis. The New Jersey-based lender relied on a $400 million FTX credit facility to stay afloat after competing crypto lenders Voyager Digital Ltd and Celsius Network went bankrupt earlier in 2022.
In November 2022, the Bahamas-based exchange shocked the crypto world by declaring bankruptcy after experiencing withdrawals of around $6 billion in just 72 hours. FTX's affiliated hedge fund Alameda Research also filed for bankruptcy. The collapse of these companies, founded by former billionaire Sam Bankman-Fried, was one of the most high-profile failures in the crypto sector. Investors in FTX included Sequoia, BlackRock and Canada's largest pension plan.
A crypto lender brought down by the collapse of Terra USD and Luna, Celsius began its U.S. bankruptcy case in July 2022. Since then, Celsius has been embroiled in disputes over fraud investigations, disparate treatment of customer accounts, customer privacy, and its spending on a new bitcoin mining facility.
New Jersey-based crypto lender Voyager Digital filed for bankruptcy in the United States in July 2022 after Three Arrows Capital defaulted on a crypto loan worth more than $650 million. In December 2022, the U.S. affiliate of major crypto exchange Binance announced plans to acquire Voyager's crypto lending platform in a deal valued at around $1 billion. However, the transaction could be delayed or blocked during a review by a U.S. body that assesses foreign investments in U.S. firms for national security risks.
Three Arrows Capital
The crypto hedge fund Three Arrows Capital filed for bankruptcy on 1st of July 2022, brought down by the collapse of the stablecoin Terra USD and its sister token Luna in May 2022. These meltdowns wiped out $42 billion in investor value and resulted in an arrest warrant in South Korea for Terra USD's developers.
Mt. Gox was a cryptocurrency exchange that filed for bankruptcy in 2014 after it lost nearly 850,000 bitcoins worth over $450 million at the time. The bankruptcy case has been ongoing for several years, and the payout to creditors has been delayed multiple times. Most recently, the repayment deadline has been pushed to October 2023 - almost ten years after Mt. Gox filed for bankruptcy.