The companies that helped create 2022’s ‘crypto winter’

(Andrey Rudakov/Bloomberg News)
17 min

The day Sam Bankman-Fried’s portrait graced the cover of Forbes in October 2021, cryptocurrency was a $2.2 trillion market — a valuation that would swell past $3 trillion a month later. Then 29 and one of the youngest self-made billionaires to land on the magazine’s ranking, he touted plans to give away his $22.5 billion fortune for the good of humanity.

But now his wealth is gone and his cryptocurrency exchange, FTX, has filed for bankruptcy, its top 50 creditors owed $3.1 billion. The collapse has roiled the crypto market, which in early December hovered near $866 billion — around its lowest point since 2020. On Tuesday, Bankman-Fried was hit with a slew of civil and criminal fraud charges, a day after his arrest in the Bahamas at the request of the U.S. Justice Department.

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Yet the FTX implosion is only a grim finale to a year that saw several major crypto players and their larger-than-life founders topple. Looking back, they were marked by risky bets, the overpromise of large yields and customers who lost everything. Bankman-Fried even tried to bail out some of those troubled businesses before he flailed out on his own.

Nearly all of the companies have filed for bankruptcy, and at least one of their founders appears to be on the lam. Here’s a look at how the “crypto winter” began.

Terraform Labs

The Singapore-based company created TerraUSD — a cryptocurrency algorithmically pegged to the U.S. dollar — along with an associated token called Luna. By parking Terra on an affiliated platform called Anchor, investors were promised nearly 20 percent returns.

But in May, TerraUSD plummeted amid a mass sell-off of the tokens. The crash spread through the crypto market, erasing about $500 billion in value in two weeks, decimating the portfolios of retail investors.

The meltdown prompted financial watchdogs to focus attention on the industry, as well as proposals to regulate stablecoins such as TerraUSD. It also set off a chain reaction that saw the downfall of crypto lenders Voyager Digital and Celsius Network, and hedge fund Three Arrows Capital, plunging the industry into further turmoil.

Do Kwon, the South Korean co-founder of Terraform Labs, appears to be on the run, according to multiple news reports, and South Korean prosecutors have issued a warrant for his arrest. But even after the destruction was clear, Terraform Labs introduced a new cryptocurrency, with Kwon calling it a “chance to rise up anew from the ashes.” The new coin is still available.

Celsius Network

Celsius Network raised $400 million in an investment round in fall 2021 and, at its pinnacle, had amassed about $20 billion in assets. But it, too, got dragged down by the TerraUSD crash in May and by July had filed for bankruptcy.

For years, the crypto lender had offered astronomically high yields — as much as 30 percent — to consumers who deposited bitcoin and other digital coins. While it acted much like a bank, billing itself as a democratized interest income and lending platform, accounts were not federally insured. Nor was it required to demonstrate that it had sufficient assets to pay back investors if they demanded their money. State regulators took notice, with officials in Alabama and New Jersey accusing Celsius of selling unregistered securities.

In June, with the broader crypto market still rattled by the fall of TerraUSD, Celsius halted withdrawals from hundreds of thousands of accounts, citing “extreme market conditions.” The news sent cryptocurrency prices tumbling.

A month later, Celsius filed for bankruptcy, prompting fears that depositors would never get their money back. Some researchers said Celsius’s investment activities may have contributed to the fall of TerraUSD, highlighting the interconnectedness of the industry.

Voyager Digital and Three Arrows Capital

Like Celsius, cryptocurrency lender and broker Voyager Digital offered high returns on its retail accounts. Voyager also worked with large institutional investors, such as hedge fund Three Arrows Capital, which borrowed about $665 million from Voyager. The Singapore-based Three Arrows, headed up by investors Su Zhu and Kyle Davies, used the loans, like the one from Voyager, to make risky bets, all on the assumption that crypto prices would keep going up, as Bloomberg reported in July.

But as the collapse of TerraUSD and Luna rippled through the broader crypto market, Three Arrows’ investments turned south. It filed for bankruptcy in July, went into liquidation and defaulted on its loan to Voyager. Soon after, Voyager suspended customer withdrawals and itself filed for bankruptcy. According to court filings, Voyager had more than 100,000 creditors and listed assets and liabilities of between $1 billion and $10 billion.

That month, FTX, which had been snapping up distressed crypto companies, offered to bail out Voyager — an offer that was rejected, according to Reuters. But in September, FTX purchased the company at auction for $1.4 billion and was slated to acquire it. Now that FTX has entered its own bankruptcy proceedings, Binance — the FTX rival that helped touch off its collapse — may make its own bid for Voyager, Binance’s leader, Changpeng Zhao, told Bloomberg in November.


The cryptocurrency bank faced collapse as the market tumbled this summer. But Bankman-Fried, FTX’s founder, lined up a $400 million bailout to stabilize it. When FTX eventually crumbled in November, BlockFi paused customer withdrawals and later said it had “significant exposure to FTX and associated corporate entities,” including money it had tied up in the exchange and Bankman-Fried’s trading firm, Alameda Research.

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Shortly after, BlockFi filed for bankruptcy, listing at least 100,000 creditors and liabilities between $1 billion and $10 billion. One of those creditors is the Securities and Exchange Commission, to which BlockFi in February agreed to pay a $50 million fine over charges that it violated securities laws and made false statements about its business. BlockFi also agreed to pay $50 million to 32 states. Like Celsius and Voyager, BlockFi offered cryptocurrency accounts that promised high returns to everyday investors.


FTX stands apart because, unlike Voyager and Celsius, it is the first major cryptocurrency exchange to topple. Founded in 2019, FTX evolved into a marketplace where, in addition to cryptocurrencies, retail investors could trade cryptocurrency derivatives — complex financial instruments used to make bets on price swings. The company also offered accounts that promised high yields. During a funding round in January, it was valued at $32 billion. Bankman-Fried, meanwhile, donated to Democratic lawmakers and courted regulators as he pushed regulations that would have largely benefited his business.

But in November, CoinDesk published a report showing that Bankman-Fried’s trading firm, Alameda Research, had an outsize number of an FTX-issued cryptocurrency on its books. Days later, Zhao, the Binance chief executive, said he’d sell roughly $530 million of the coin, FTT. Panic ensued and FTT prices plunged, sparking an investor run on FTX. The exchange froze withdrawals and, soon after, filed for bankruptcy.

The cause of FTX’s fall is still being untangled. But the Wall Street Journal reported that FTX loaned customer funds to Alameda Research to fund its risky bets. In an hour-long live interview last week with New York Times columnist Andrew Ross Sorkin, Bankman-Fried said he “didn’t knowingly commingle funds.”

Now Bankman-Fried faces a torrent of legal issues.

On Monday, he was arrested in the Bahamas at the request of U.S. authorities, the Justice Department announced. On Tuesday, the U.S. attorney for the Southern District of New York unsealed an eight-count indictment against Bankman-Fried alleging fraud and conspiracy charges, while the SEC announced civil charges accusing Bankman-Fried of diverting funds to Alameda without investors’ knowledge. The Commodity Futures Trading Commission also levied fraud charges against Bankman-Fried and FTX, alleging they and Alameda “intentionally or recklessly” made “untrue or misleading statements” in connection with the sale of commodities.

Bankman-Fried — along with a list of celebrities who endorsed FTX — is also facing a class-action lawsuit in Florida.

“Look, I screwed up. I was the CEO of FTX,” Bankman-Fried told Sorkin in November. “I say this again and again. That means I had a responsibility. We messed up big.”

Editing by Robbie Olivas DiMesio and Karly Domb Sadof.