The Year Crypto Broke: How Customers, Investors Lost Millions and What’s Being Done

It seemed like cryptocurrency was having a moment.

In early 2022, the Super Bowl featured celebrities such as Tom Brady, Larry David and Matt Damon in commercials for crypto companies. Logos of crypto companies such as FTX could be seen plastered on several sports arenas, and a new wave of crypto influencers emerged, gaining hundreds of thousands of followers. Cryptocurrency was everywhere.

It was supposed to be an alternative to traditional finance.

Instead of exchanging money through a third party, such as a bank, cryptocurrency allows users to transfer digital currency directly. But unlike traditional forms of currency like the US dollar, the government does not insure deposits, and federal agencies have taken limited steps to regulate the crypto industry.

But the big crypto market crash last year has led to headaches, fear and anger among millions of people around the world who invested their savings and wonder if they will ever see their money again.

Curt Dell, a father of three from California, told ABC News’ Rebecca Jarvis that he has lost over $200,000 in Bitcoin after digital crypto lending company Celsius went bankrupt last year.

“It robbed [my family] of so much potential,” said Dell, a California resident who works in sales. “It’s such a bad situation.”

“Impact x Nightline” takes a closer look at the chaos across the industry, talking to executives at some of the biggest crypto companies, top officials at regulatory agencies and the ordinary customers who suffered from the collapse. This episode is now streaming on Hulu.

“Crypto kind of rose out of the 2008 financial crisis,” David Yaffe-Bellany, a New York Times reporter who covers crypto, told “Impact.”

“That whole disaster exemplified the failures of the centralized financial system, and it helped inspire this movement to create a parallel financial system that didn’t rely on the kinds of institutions whose bad behavior had caused many people to suffer.”

The crash shook the entire industry – and several companies, including Celsius Network, filed for bankruptcy.

“What the crash did was lead to kind of a run on the bank. People panicked,” Yaffe-Bellany said. “They believed that their cryptocurrencies were at risk, and they moved to withdraw everything they deposited in Celsius, and that’s what exposed the kind of shaky foundation of the whole company.”

Celsius was founded by Alex Mashinsky and two partners in 2017. Mashinsky used social media to promote his company and its high-yielding crypto earnings.

“The whole idea of ​​the Celsius network was that it was a kind of cryptobank, except better than a bank,” Yaffe-Bellany said. “You’d deposit crypto. It would be safe there, but you’d also get these huge returns on top of that.”

At its peak, Celsius had 2 million customers and a valuation of $3 million. The company filed for bankruptcy in July.

In early January, New York Attorney General Letitia James sued Mashinsky, accusing him of defrauding investors. He did not respond to multiple requests from ABC News for an interview or comment.

It is too early to know how the Celsius bankruptcy process will play out and whether customers will get any of their money back.

“I’d like to be optimistic and think I’ll get at least a significant portion of it back,” Dell said of his investment. “I don’t think anyone really knows.”

Celsius’ bankruptcy has also been intertwined with the biggest scandal to rock the crypto industry: the fall of one of the largest cryptocurrency exchanges, FTX.

Sam Bankman-Fried, the founder and CEO of FTX, posted on social media suggesting he might bid to take over Celsius’ assets shortly after the company filed for bankruptcy.

But that was before FTX found itself in trouble as well.

In early November, FTX filed for bankruptcy after a series of events revealed a multibillion-dollar hole in the company’s balance sheet. A little over a month later, Bankman-Fried was charged in federal court with eight counts of wire fraud. He has pleaded not guilty, and the trial is due to start in October.

The series of high-profile collapses in the crypto industry have led to calls for more regulation from the federal government.

The high-profile crypto collapses have led to calls from activists, elected officials and others for more regulation from the federal government.

Christy Goldsmith Romero, a commissioner at the Commodity Futures Trading Commission, told “Impact” that she agrees the industry needs more oversight.

“We need, as regulators, the ability to go in to inspect, to go in and have exams, to set rules. And we need to make sure there’s no commingling of assets,” she said.

Gary Gensler, chairman of the US Securities and Exchange Commission, told “Impact” that he is willing to work more with the CFTC to protect consumers from shady crypto investments. Meanwhile, he warned consumers to think twice before investing their money in crypto.

“Don’t get caught up in FOMO, but you’re also at risk of a field whose business model takes your assets [and] to mix them together, often in ways not allowed by our current laws,” he said.