Image depicting various cryptocurrencies including Bitcoin, Ethereum, and altcoins, representing the diverse and dynamic nature of the crypto market.

Crypto Disasters Jul 2022 to Jul 2023

CELSIUS

Celsius then

Crypto lender Celsius Network has filed for bankruptcy after battling with insolvency issues. The company’s decision to file for bankruptcy came as plummeting crypto prices, inflationary pressures, and volatile market conditions caused consumer confidence in the industry to decline. Here is a timeline of events leading up to Celsius’ bankruptcy filing:

  • April 12, 2022: Celsius Network announces changes to its Earn product for users in the United States, signaling the company’s distress and regulatory discussions.
  • May 2022: The collapse of the LUNA and UST coins leads to a loss of consumer confidence in the crypto market and triggers a series of withdrawals by Celsius users.
  • June 12, 2022: Celsius freezes withdrawals and transfers due to extreme market conditions, raising concerns about the platform’s solvency.
  • June 30, 2022: Celsius hires restructuring expert Alvarez & Marsal to explore options for mitigating the fallout from its liquidity issues.
  • July 3, 2022: Celsius lays off approximately 23% of its workforce as it faces mounting liquidity problems.
  • July 7, 2022: DeFi aggregator KeyFi files a lawsuit against Celsius, alleging market manipulation and failure to protect user deposits.
  • July 12, 2022: Celsius transfers funds to Aave, closing its loan and freeing up collateral.
  • July 13, 2022: Celsius Network files for Chapter 11 bankruptcy protection.
  • July 14, 2022: A court filing reveals Celsius has a $1.3 billion hole in its balance sheet, which the company acknowledges for the first time.

These events reflect the challenges Celsius Network faced during the crypto crash, leading to its decision to file for bankruptcy and address its liquidity and financial issues.

celsius Now

Altcoin holders owed money by Celsius Network, which filed for Chapter 11 bankruptcy protection, will have the option to convert their altcoins into Bitcoin and Ethereum, according to a recent ruling by a New York court.

The court granted Celsius the authority to make efforts to maximize the value of the altcoins held by the company, allowing them to be sold or converted into Bitcoin and Ether.

Celsius has been collaborating with regulatory authorities and engaged in discussions with the SEC regarding the categorization of digital assets as securities. The court also mandated Celsius to submit a monthly report detailing the conversion of altcoins into BTC and ETH.

The acquisition of Celsius by the Fahrenheit crypto consortium further signifies a revised bankruptcy plan that will distribute assets exclusively in Bitcoin and Ether, potentially impacting the creditors and the company’s financial outlook. These measures aim to ensure transparency, accountability, and facilitate the repayment of funds to debtors.

VOYAGER

VOYAGER THEN

The collapse of Voyager Digital Ltd., a bankrupt broker, has shaken the confidence of crypto investors who trusted large trading platforms for security.

The news that customers are unlikely to recover all their investments has raised concerns among those who believed these platforms offered some form of protection.

The recent decline in the crypto market has led to financial troubles for companies in the industry, with some suspending withdrawals and cutting jobs. The Voyager implosion is seen as another setback in what is now referred to as a “crypto winter.”

Investors who have the ability to withdraw their funds are doing so rapidly, leading to a decrease in the total balance on exchanges. The situation has left investors feeling robbed and has eroded trust in the system.

VOYAGER now

The bankrupt crypto brokerage firm Voyager Digital Ltd. is facing a legal bill of $5.17 million for services provided by McDermott Will & Emery law firm.

The legal fees cover the period from March 1 to May 13, 2023, and are significantly higher than the committee’s initial projection. The law firm charged the most for negotiating the sale plan of Voyager’s assets.

The billing includes fees for legal advice, attending meetings, and drafting legal documents. Voyager has already paid $8.9 million to the law firm but still owes the remaining amount.

The bankruptcy proceedings and search for potential buyers have led to increased legal costs for Voyager and other insolvent crypto firms.

VAULD

Vauld then

In July 2022, Asian crypto lender Vauld faced significant challenges and setbacks that led to its downfall. Several factors contributed to the company’s struggles during this period.

  1. Regulatory Issues: Vauld encountered regulatory hurdles and compliance issues with authorities in various jurisdictions. This created uncertainty and raised concerns among investors and users of the platform, affecting its operations and reputation.
  2. Security Breach: Vauld experienced a major security breach, compromising the integrity and safety of user funds and personal information. This incident eroded trust in the platform and resulted in a loss of confidence from customers, leading to a decline in user participation.
  3. Market Volatility: The cryptocurrency market witnessed high levels of volatility during this period. Fluctuating prices and uncertain market conditions impacted Vauld’s lending and borrowing activities, making it challenging to sustain profitability and attract new customers.
  4. Lack of Differentiation: Vauld faced intense competition in the crypto lending space, with several established players offering similar services. The company failed to differentiate itself effectively, resulting in a struggle to attract and retain customers in a crowded market.
  5. Inadequate Risk Management: Vauld’s risk management strategies and protocols were inadequate to handle the evolving market dynamics. This exposed the platform to potential financial risks, leading to losses and reduced investor confidence.
  6. Trust and Reputation: The combination of regulatory issues, security breaches, and market challenges tarnished Vauld’s trust and reputation within the crypto community. Negative publicity and concerns about the platform’s reliability further contributed to its downfall.
Vauld Now

Vauld, a Singapore-based crypto lender and exchange, is in preparation to pay back INR balances to creditors by August 2023. The exchange’s payback scheme was approved by 91.85% of creditors and the platform is likely to start paying creditors back soon.

The lender proposed paying creditors back in excess of 100%, offering a better outcome than liquidation.

SOUTHT KOREAN UPRISE

UPRISE THEN

During the Terra-LUNA collapse in May, the South Korean fintech startup Uprise reportedly had over US$20 million, or 99% of its client funds, liquidated. The startup’s trading unit had placed client funds on a short position on LUNA Classic (LUNC), previously known as LUNA. However, the bet went wrong, resulting in the liquidation of the majority of client funds. The loss also includes approximately US$3 million of Uprise’s own funds.

Uprise provided AI-based robo advisory trading services to high net worth clients and claimed that its robo advisor was less prone to risks than human-led investments. The startup had received investments worth around US$35 million from major South Korean venture capitals, including Hashed, Kakao Ventures, and KB Investments.

Uprise is currently working on a compensation plan for the affected clients and has stated its commitment to resolving the situation.

Thank you for reading.

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