Crypto Market Crash: Layoffs, Bankruptcies and Frozen Accounts
The crypto market has thrown up $ 2 trillion in the last seven months, an astonishing merger that has turned the once fast-growing industry. The crash has triggered layoffs at stock exchanges and lenders, freezing of accounts that have left customers in the cold and even bankruptcy of some over-leveraged companies.
Here’s how the crash has affected consumers, employees and investors, giving new energy to regulators’ efforts to curb a market for digital assets that SEC leader Gary Gensler has called the Wild West.
Consumers feel the sting
As cryptocurrencies continued to fall, some companies restricted or froze withdrawals and trades, citing conditions compared to bank transactions. Critics and regulators threw themselves into these measures, saying they showed a lack of protection for investors and an abundance of risk from some companies that lent customer funds and promised sky-high rewards.
June 12: Celsius stopped withdrawals, exchanges and transfers after facing a liquidity crisis. The company was badly damaged by the Terra collapse and a fall in the value of fenced ether, or stETH.
June 13: Binance, the world’s largest crypto exchange, stopped bitcoin withdrawals for several hours. The exchange blamed a “fixed transaction.”
June 17: Babel Finance, another cryptocurrency lender, froze withdrawals. The company blamed the break on “unusual liquidity pressure.” Finblox also tightened the withdrawal limits and put the reward awards on hold. The investment platform is supported by Three Arrows Capital and was affected by the hedge fund’s liquidity crisis.
June 23: Coinflex, a cryptocurrency lender and futures platform, halted withdrawals, citing “extreme market conditions.”
July 1st: Crypto-lender Voyager suspended withdrawals, deposits and trading. The company received a $ 200 million revolving line of credit and $ 15,000 from FTX CEO Sam Bankman-Peace’s firm Alameda Research.
4th of July: Vauld, a cryptocurrency lender that is particularly popular in Southeast Asia and India, stopped withdrawals. Nexo offered to buy the company on July 5, and said that it would prioritize restarting the withdrawal options after the acquisition.
July 14: CoinFlex began allowing customers to withdraw 10% of their account balances, except for the company’s flexUSD stablecoin.
Employees lose their jobs
Crypto hiring increased by 73% from 2019 to 2021, according to LinkedIn, and well into 2022, some companies maintained aggressive hiring plans. But Coinbase reversed plans to triple the workforce this year, quickly laying off and eventually resorting to layoffs. Not everyone is cutting back: Binance, Kraken and Ripple are among the companies still hiring.
June 1: The Brazilian crypto exchange 2TM laid off more than 80 employees and blamed “rising interest rates and inflation”.
June 2: Gemini, the crypto exchange run by brothers Cameron and Tyler Winklevoss, laid off 10% of employees. In a letter to employees, the brothers said the cuts were due to “turbulent market conditions that are likely to persist.”
June 10: Crypto.com cut 5% of employees, or 260 people. CEO Kris Marszalek said in a tweet that the company needed to “ensure continued and sustainable growth.”
June 13: BlockFi said it would cut 20% of employees, blaming the “dramatic shift in macroeconomic conditions.”
June 14th: Coinbase announced that it would lay off 18% of the workforce to ensure it remains “healthy during this economic downturn.” The company had previously stopped hiring and withdrawn job offers.
July 3: Celsius cut about 150 employees, or a quarter of the staff. The cuts came three weeks after the lender stopped all withdrawals from its platform.
July 5: Institutional crypto-trading platform Bullish.com cut around 30 employees. A spokesman told Block that the company is still hiring for “strategic roles.” In addition, eToro cut 6% of its employees, or around 100 workers. The company also officially terminated the SPAC merger with the blank check company FinTech Acquisition Corp.
July 14: NFT marketplace Open sea laid off 20% of the workforce, and promised generous severance pay and benefits.
Investor losses are increasing
Cryptocracy forced a wave of consolidation in the industry, with quick deals aimed at rescuing weaker companies.
The meltdown of Terraform Labs’ UST and luna tokens sent shockwaves through the industry, affecting large companies that had opted for tokens, including Three Arrows Capital, one of the largest crypto hedge funds.
Shortly afterwards, stETH, a token on the Lido network that was once considered a safe bet on the new version of Ethereum 2.0, began to lose its binding. This led to further unrest in the market. Companies that had allegedly invested in stETH included Three Arrows, Celsius and Alameda Research.
Following these two incidents, the Three Arrows had a liquidity squeeze and stopped responding to margin calls. It sent further ripple effects throughout the industry. Three Arrows had borrowed from a number of major players in the crypto industry – and it is unclear to what extent the borrowing was granted.
Counterparties to 3AC such as Voyager, the main broker Genesis Trading and BlockFi took large losses as a result of working with Three Arrows, just when these companies needed cash the most. Many in the industry are wondering if other crypto borrowers, hedge funds or brokerages will be next.
Sam Bankman-Peace’s companies, FTX and Alameda, moved to support companies such as BlockFi and Voyager. In some cases, the infusions were not enough: Voyager filed for bankruptcy despite FTX’s support.
June 22: Voyager received a rolling credit limit from Sam Bankman-Peace’s Alameda group of $ 200 million and $ 15,000 bitcoin.
June 29: Officials in the British Virgin Islands allegedly ordered crypto hedge fund Three Arrows Capital, which Voyager Digital said defaulted loans worth more than $ 600 million, to liquidate.
July 1st: BlockFi agreed to an agreement with FTX which gave the stock exchange an option to buy the remaining shares in the company for up to 240 million dollars. The cryptocurrency lender was once valued by investors at around $ 5 billion.
July 2: Three Arrows filed for Chapter 15 bankruptcy in New York.
4th of July: CoinShares said it would buy Napoleon Asset Management for an undisclosed amount. CoinShares acquired Napoleon Group in December.
July 5: Crypto lender Nexo agreed to buy other lender Vauld after Vauld users withdrew almost $ 200 million, causing a liquidity crisis. Nexo hired Citi in June to advise on acquisitions. Uprise is also said to have lost 99% of the funds that shorted luna during the price crash. The company uses AI-enabled automated trading strategies, and was damaged by short-lived pumps at Luna’s price.
July 6: Michael Moro, CEO of Genesis Trading, confirmed that the company took heavy losses after Three Arrows Capital failed to meet a margin requirement. The loans had a weighted average margin requirement of more than 80%, and Genesis had to sell the mortgage immediately. Voyager Digital also filed for bankruptcy. FTX is a major creditor.
July 13: Celsius filed for bankruptcy
July 14: In a bankruptcy lawsuit, Celsius revealed that the liabilities outweighed the assets by $ 1.2 billion.
Regulators are moving in
Regulation is declining globally, apparently sooner rather than later.
June 7: The much-anticipated law on responsible financial innovation was introduced by US Senators Cynthia Lummis and Kirsten Gillibrand; it found definitions of various digital assets, contained clarifications on tax provisions and proposed dividing supervision between the CFTC and the SEC.
June 8: The New York Department of Financial Services issued new guidelines requiring stack coins to be backed by reserves.
June 16: Several states opened an investigation into Celsius’ move to freeze withdrawals.
June 30th: The European Parliament and the Council reached a preliminary agreement on the Markets in Crypto-Assets bill, another step towards completing it. The bill, known as MiCA, will introduce clearer regulations for crypto companies, including sustainability disclosures and stack coin regulation. The EU’s new rules for transferring funds are also set to enforce anti-money laundering and know-it-yourself customer requirements, where crypto companies will have to collect information and personal data for all transactions.
4th of July: Tharman Shanmugaratnam, chairman of the board of the Monetary Authority of Singapore, said the financial watchdog “carefully considers” some additional consumer protection measures, including “placing restrictions on retail participation and rules on the use of influence in transactions in cryptocurrencies.”
July 8: In a speech in London, Federal Reserve Deputy Lael Brainard called for the “regulatory scope” to be extended to include crypto, citing recent market turmoil.
July 12: Vermont’s financial regulators warned Celsius customers that the lender would likely be “deeply insolvent.” California regulators also said they investigated providers of “crypto-interest accounts” and encouraged consumers to file complaints.
