Celsius

Crypto Biz: A peek into BlockFi’s secret financials (it’s not pretty)

How much exposure does BlockFi have to Sam Bankman-Fried failed enterprises? A lot, according to accidentally leaked financials.

Crypto lender BlockFi has had a highly tumultuous 12 months. After getting caught up in the Terra fiasco, which resulted in one of the most prolific asset death spirals of all time, the company managed to avoid bankruptcy after receiving a $400 million lifeline in July 2022. The problem? Its lender was FTX US, and we all know what happened next.

Although BlockFi has attempted to separate itself from Sam Bankman-Fried’s fraud in the aftermath of FTX’s collapse, its secret financials tell a different story.

This week’s Crypto Biz delves into BlockFi’s uncensored financials, the likelihood of “Celsius token” ever seeing the light of day and the latest high-profile funding deal in blockchain.

Breaking: BlockFi uncensored financials reportedly shows $1.2B FTX exposure

Just how bad are BlockFi’s financials? For starters, the bankrupt crypto lending firm reportedly has $1.2 billion in assets tied up in Sam Bankman-Fried’s failed companies — FTX and Alameda Research, to be specific. According to CNBC, BlockFi made these details public by accident, adding insult to injury. Nevertheless, the documents show that the company had $315.9 million worth of assets linked to FTX and $831.3 million in loans to Alameda as of Jan. 14. Although BlockFi has attempted to separate itself from SBF’s companies, it looks like it’ll continue to circle the same drain as FTX and Alameda.

BlockFi to sell $160M in Bitcoin miner-backed loans: Report

BlockFi is reportedly looking to sell $160 million in loans backed by 68,000 Bitcoin (BTC) miners as part of its bankruptcy proceedings. That sounds like a good strategy to raise liquid funds, right? Unfortunately, some of these loans have already defaulted and are likely undercollateralized following Bitcoin’s year-long bear market. A legal expert interviewed by Cointelegraph cautioned that the loans are probably “not worth their paper value anymore.” Let’s hope for BlockFi’s sake that the value of the mining equipment used in the collateral isn’t worth less than the value of the loans.

New ‘Celsius token’ may be used to repay creditors: Report

Months before FTX collapsed, crypto lender Celsius filed for bankruptcy after its degen crypto portfolio failed to survive the bear market. Billions in customer deposits now hang in the balance as the company looks for an optimal reorganization strategy. This week, it was reported that Celsius was considering issuing its own token to repay creditors. Of course, this means relaunching its platform. Apparently, Celsius wants to wrap this up in a new publicly-traded company that is “properly licensed.” I’m not sure Alex Mashinsky will ever succeed in crypto again, but here’s hoping Celsius creditors get something in return for trusting him in the first place.

Injective launches $150M ecosystem fund to boost DeFi, Cosmos adoption

If you’re looking for a silver lining in crypto this week, take solace in the fact that companies are once again raising hundreds of millions in venture capital (VC). Chief among them is Injective, the layer-1 blockchain protocol built on Cosmos SDK. This week, Injective announced a $150 million ecosystem fund backed by Pantera Capital, Kraken Ventures, Jump Crypto, KuCoin Ventures, Delphi Labs and others. The fund will support developers building on the Cosmos network — specifically infrastructure solutions, trading platforms and proof-of-stake technology. Will crypto VC rebound strongly in 2023? Only time will tell.

Before you go: Why is crypto pumping?

Bitcoin’s price crawled back above $23,000 this week and appeared to have entered a higher range — raising cautious optimism that the bottom is in. But does anyone know why BTC and the broader crypto market are pumping? In this week’s Market Report, I sat down with fellow analysts Marcel Pechman and Joe Hall to discuss whether the current pump is sustainable. We also explored what could be in store for digital assets in the coming months. You can watch the full replay below:

Crypto Biz is your weekly pulse of the business behind blockchain and crypto, delivered directly to your inbox every Thursday.

Leaked bids: Binance, Galaxy Digital among secret bidders for Celsius assets

Crypto blogger Tiffany Fong has shared documents she claims to have obtained in late December detailing several bids for Celsius’ crypto assets.

At least five firms placed bids on Celsius Network’s crypto assets, including Binance, Bank To The Future and Galaxy Digital, according to leaked information shared by crypto blogger Tiffany Fong. 

Fong, a follower of Celsius developments who shot to fame after several exclusive interviews with Sam Bankman-Fried following FTX’s collapse, has published documents she says were obtained on Dec. 20 “detailing the bids on Celsius Network’s crypto assets.”

In a Substack post, Fong explained that she initially refrained from leaking the bids to avoid disrupting the bidding process but was prompted to do so after recent commentary from a lawyer representing Celsius.

“I refrained from sharing the bids publicly to avoid disrupting the bidding procedures or negatively impacting customer recoveries; however, in yesterday’s Celsius Network court hearing (1/24/23), Kirkland & Ellis attorney Ross M. Kwasteniet proclaimed the bids ‘have not been compelling,” Fong explained.

Among the bidders revealed by Fong include crypto exchange Binance, online investment platform Bank To The Future, digital asset investment manager Galaxy Digital, crypto trading company Cumberland DRW and digital asset investment firm NovaWulf.

According to Fong, the proposals from these crypto firms were submitted in November, but they were “for the most part, abandoned.”

Fong stated that Binance proposed a bid of $15 million for the assets, with $12 million earmarked for the Celsius estate and $3 million to be distributed to “migrated users on a pro-rata basis.”

In the purported Summary Term Sheet from Binance, the crypto exchange said that it intends to “acquire and transfer all liquid and certain illiquid crypto” at the fair market value to Binance’s platform.

Galaxy Digital proposed to acquire all illiquid and staked Ether (ETH) assets as it sought to be the “designed stalking horse bidder” — a name given to the initial bidder for the sale of distressed assets — for the amount of approximately $67 million.

Meanwhile, Bank To The Future’s bid stated in its transaction structure that all liquid crypto assets and collateral werto be returned to creditors pro rata, under the management of Bank To The Future.

In a Jan. 26 tweet, Bank To The Future CEO Simon Dixon has since confirmed that the contents of the leaked bids relating to his firm were accurate.

Fong noted in the blog post that she is “only aware of these five bids” on Celsius’ crypto assets.

She added that Novawulf’s bid was “particularly interesting,” due to having a vague resemblance to “Celsius Network’s newly-proposed restructuring plans.”

In comments to Cointelegraph, Fong said that she has had conversations with “multiple Celsius Network employees” and to her surprise, most employees “were not even made privy to the bids.”

She added that “not even those in upper-level management” were aware of this information.

Related: Celsius amasses 30 potential bidders for its assets, withdrawal motion approved

Fong said that creditors and “even most employees” have been left in the dark about the bids on crypto assets that investors deposited onto the platform.

Fong is not sure how “things will unfold,” but thinks that creditors deserve “more transparency” and have a right to see the bids on assets that “we deposited onto the platform.”

Binance declined to comment, saying that “as a matter of policy, we do not comment on speculations, rumors or deals in progress.”

Cointelegraph has reached out for comments from Galaxy Digital, Bank To The Future, NovaWulf and Cumberland DRW.

Update (Jan. 27, 6:39AM UTC): Added statement from Binance spokesperson.

Judge denies motions from Celsius users seeking to reclaim assets

Two claimants called out former Celsius CEO Alex Mashinsky in motions, claiming he misled users, while all suggested that the platform’s terms of use left assets in their control.

A judge overseeing bankruptcy proceedings for crypto lending firm Celsius Network has denied motions from three users with different claims on assets stuck since July.

In orders filed with the United States Bankruptcy Court in the Southern District of New York on Jan. 25, Judge Martin Glenn denied a motion from Rebecca Gallagher, a Celsius claimant who argued her interest-bearing “Earn” assets on the platform were “her property and not property of the bankruptcy estates” under the control of the debtors. The judge denied similar motions from Celsius account holders Mark Benzaken and Kulpreet Khanuja.

Motions from the three individuals included claims that Celsius’ terms of use did not allow for transferring their assets from the platform to control of the debtors in the event of bankruptcy. Gallagher and Khanuja both called out Alex Mashinsky by name, claiming the former Celsius CEO misled customers with public statements and said users would retain full ownership of their assets, respectively.

Judge Glenn said the court took the allegations against Mashinsky “seriously” but denied all three motions. In Khanuja’s case, he said:

“Any claim that Celsius breached its contract with Khanuja would not affect the ownership of cryptocurrency deposited in Khanuja’s account. As the Earn Opinion explains, the cryptocurrency deposited in Earn Accounts became property of Celsius […] the cryptocurrency in Khanuja’s Earn Accounts was and remains property of the estate.”

Louise Abbott, a partner at United Kingdom-based firm Keystone Law, told Cointelegraph in December that one legal tactic available to FTX users — the exchange is also going through the bankruptcy process in the U.S. — would be to claim their crypto and fiat assets “remained their property at all times” and shouldn’t be under the control of the debtors’ estates. Though Abbott was referring to FTX funds donated to third parties, the recent rulings in the Celsius case suggested its terms of use granted the platform “all right and title to such Digital Assets, including ownership rights”.

Related: Bankruptcy judge orders $44M in crypto to be returned to Celsius customers

Celsius reported liquidity issues in June 2022 and blocked user withdrawals, citing “extreme market conditions.” The company later filed for bankruptcy in July. U.S. authorities have filed suit against Mashinsky for his role in the platform’s downfall for allegedly giving “false and misleading statements” to investors and hiding the firm’s “dire financial condition”.

Celsius’ mining arm announces $1.3M sale of equipment

According to Celsius, Touzi Capital made the best offer for the mining rigs following discussions with “several brokers and market participants.”

The mining arm of crypto lender Celsius Network has issued a notice for the sale of $1.3 million worth of mining equipment as part of its bankruptcy case.

In a Jan. 11 filing with the United States Bankruptcy Court of the Southern District of New York, Celsius says it will be selling 2,687 MicroBT M30S ASIC rigs to investment firm Touzi Capital. Touzi, which invests in real estate and blockchain, will pay Celsius Mining more than $1.3 million for the miners, located at a Texas facility.

According to Celsius, Touzi made the best offer for the miners following discussions with “several brokers and market participants.” The lending firm announced in January that Core Scientific had shut down more than 37,000 Celsius-owned mining rigs the firm had been hosting.

Cast your vote now!

Celsius filed for Chapter 11 bankruptcy in July 2022, leaving a reported $4.7 billion in user deposits locked up on the platform. In a December court ruling, a federal judge said Celsius had until Feb. 15 to file a restructuring plan.

Related: Mining Bitcoin at home — Is it time to start? Market Talks

The United States is the global leader in the Bitcoin (BTC) hash rate, which was more than 37% as of December 2021, according to data from the Cambridge Bitcoin Electricity Consumption Index. However, the crypto market crash in 2022 affected the profitability of mining, as has extreme weather events requiring facilities to curtail operations.

NY AG files lawsuit against Alex Mashinsky, alleging he hid Celsius’ ‘dire financial condition’

Alex Mashinsky’s actions leading up to Celsius declaring bankruptcy allegedly contributed to investor losses by misrepresenting the platform’s financial condition to investors.

New York Attorney General Letitia James has filed a lawsuit against Alex Mashinsky, alleging the Celsius founder and CEO made numerous “false and misleading statements” which led to investors losing billions. 

In a Jan. 5 announcement, the New York Attorney General’s office announced the lawsuit, which allegedly involved defrauding more than 26,000 residents of the U.S. state out of billions of dollars worth of crypto. According to James, Mashinsky’s actions leading up to Celsius declaring bankruptcy contributed to investor losses by misrepresenting the platform’s financial condition and failing to personally register as required by state law.

“As the former CEO of Celsius, Alex Mashinsky promised to lead investors to financial freedom but led them down a path of financial ruin,” said James. “The law is clear that making false and unsubstantiated promises and misleading investors is illegal. Today, we are taking action on behalf of thousands of New Yorkers who were defrauded by Mr. Mashinsky to recoup their losses.”

The lawsuit aimed to ban Mashinsky from “doing business in New York” in the future as well as pay damages, restitution, and disgorgement to affected Celsius investors.

This story is developing and will be updated.

Alex Mashinsky sued by NY AG for allegedly hiding Celsius’ ‘dire financial condition’

Alex Mashinsky’s actions leading up to Celsius declaring bankruptcy allegedly contributed to investor losses by misrepresenting the platform’s financial condition.

New York Attorney General Letitia James has filed a lawsuit against Alex Mashinsky, alleging the Celsius founder and former CEO made numerous “false and misleading statements” which led to investors losing billions. 

In a Jan. 5 announcement, the New York Attorney General’s office announced the lawsuit, which allegedly involved defrauding investors — including more than 26,000 residents of the U.S. state — out of billions of dollars worth of crypto. According to James, Mashinsky’s actions leading up to Celsius declaring bankruptcy contributed to investor losses by misrepresenting the platform’s financial condition and failing to abide by certain regulatory requirements.

“As the former CEO of Celsius, Alex Mashinsky promised to lead investors to financial freedom but led them down a path of financial ruin,” said James. “The law is clear that making false and unsubstantiated promises and misleading investors is illegal. Today, we are taking action on behalf of thousands of New Yorkers who were defrauded by Mr. Mashinsky to recoup their losses.”

In addition to Mashinsky allegedly pushing a false narrative through appearances at conferences, on social media and in interviews, James said Celsius customers did not have the same protection as those at traditional financial institutions due to the platform not being subject to regulatory requirements. The lawsuit aimed to ban Mashinsky from “doing business in New York” in the future as well as having him pay damages, restitution and disgorgement to affected Celsius investors.

Related: Judge rules Celsius owns funds in Earn accounts, paving the way for stablecoin sale

Celsius filed for Chapter 11 bankruptcy in July 2022, leaving many crypto users with assets locked on the platform and a balance sheet gap in the billions. Mashinsky resigned as CEO in September, saying his role had become an “increasing distraction” amid users facing “difficult financial circumstances”.

Judge rules Celsius owns funds in Earn accounts, paving the way for stablecoin sale

Judge Martin Glenn found the terms of use for the Earn program “unambiguous,” and besides that, treating account holders as unsecured creditors was more equitable.

Judge Martin Glenn, who is presiding over the Celsius bankruptcy case, ruled on Jan. 4 that the funds in the Celsius interest-bearing Earn program belong to Celsius under the terms of the program’s terms of use. The funds reportedly amount to more than $4 billion. 

“The issue of ownership of the assets in the Earn Accounts is a contract law issue,” the U.S. bankruptcy judge wrote, citing the latest version of the Earn program’s terms of use. Those terms state that lending platform Celsius held “all right and title to such Eligible Digital Assets, including ownership rights.”

Related: Core Scientific shuts down 37K mining rigs it was hosting for Celsius

The judge called the terms of use “unambiguous,” and pointed out that, if the funds in question belong to the debtor, their return will depend on a Chapter 11 plan for distributions to unsecured creditors, resulting in a more equitable result than if some of the account holders are declared owners of the funds locked up in the program. The judge concluded:

“As has been said repeatedly in this opinion, creditor’s rights with respect to various defense to and breach of contract claims are reserved. Creditors will have every opportunity to have a full hearing on the merits of these arguments during the claims resolution process.”

The court gave Celsius an extension to come up with a Chapter 11 restructuring plan by Feb. 15. Judge Martin ordered the return of $44 million worth of crypto held in customers’ custodial accounts on Dec. 7. Celsius declared bankruptcy July 14.

The ruling makes reference to $18 million worth of stablecoins in the Earn program that Celsius had sought to sell, saying it should be allowed:

“In the exercise of its business judgment, the Debtors have established a good business reason to permit the sale.”

The United States Trustee and state securities regulators had argued against allowing that sale, saying Celsius already had the liquidity to operate “over the next few months.”

10 crypto tweets that aged like milk: 2022 edition

Sam Bankman-Fried, Do Kwon and Alex Mashinsky might look back on this year and wish they had hired a social media adviser or logged off Twitter.

To put it lightly, it has been a wild year for the crypto sector.

In the span of less than 12 months, the third-most valuable stablecoin imploded, leading to a domino effect that saw crypto lender Celsius go bankrupt, Three Arrows Capital’s founders go runabout and one of crypto’s most “altruistic” executives flown home in cuffs.

In this article, Cointelegraph has selected 10 crypto-related tweets that have aged like spoilt milk.

Do Kwon — “Steady lads”

On May 10, just as the algo-stablecoin formerly known as TerraUSD started to fall below its dollar peg, the Terraform Labs founder attempted to allay fears of a further depeg, tweeting: “Deploying more capital – steady lads.”

Well, we all know what happened after. The collapse of the Terra ecosystem in May 2022 saw more than $40 billion wiped from the market in that month alone.

Since then, Do Kwon and the remaining Terra community have tried to revive the project with a newer stablecoin coming into the works. TerraUSD has since been rebranded to TerraClassicUSD (USTC) and is worth $0.02 at the time of writing.

Do Kwon — “Your size is not size”

Next on the list is Kwon’s famous response to crypto trader Algod, who outlined on March 9 that if LUNA “breaks new ATH’s I will short it with size. It’s a big ass ponzi, pretty sure VC’s will also hedge their investments on perps.”

Kwon then hit back by essentially calling Algod poor, stating, “Yeah but your size is not size” before adding, “$10 short incoming, everyone take cover.”

This of course was memed back to Kwon on many occasions during and after he went into damage control mode as TerraUSD spiraled out of control.

SBF — “Sell me all you want. Then go fuck off.”

Sam Bankman-Fried (SBF) has a near-endless amount of statements that likely look terrible in current circumstances. Not only has he lied about “assets are fine” but shortly before his company filed for bankruptcy, the FTX founder also left us with the $3 Solana (SOL) meme.

In a debate on Twitter from January, crypto trader CoinMamba got under SBF’s skin in January 2021, suggesting that SOL was a great shorting opportunity over the price of $3.

After a back in forth in which the two were trying to iron out a bet on the future price, SBF finally had enough of CoinMamba’s SOL taunting and said:

“I’ll buy as much SOL as you have, right now, at $3. Sell me all you want. Then go fuck off.”

The comment became legendary in the crypto community, particularly after the price of SOL went to an all-time high of $259.96 on Nov. 6, 2021.

However, CoinMamba appears to have had the last laugh, as Bankman-Fried’s firm catastrophically collapsed a year later.

Replying to the nearly two-year-old thread, CoinMamba gave Bankman-Fried a taste of his own medicine. “I’ll buy everything you have, right now, at $3. Sell me all you want. Then go fuck off.”

Alex Mashinsky — “All funds are safe.”

Amid the LUNA fiasco in May, rumors started to float that Celsius was having liquidity issues and could be heading for serious trouble, while others had claimed the firm had already been “completely wiped out.”

In a bid to quickly assure Celsius customers, Mashinsky responded to the rumors by stating in a May 12 tweet: “Notwithstanding the extreme market volatility, Celsius has not experienced any significant losses,” adding:

“All funds are safe.”

These four words went on to become a harbinger of doom for the industry.

A month later, on June 12, the firm paused all withdrawals. On July 13, it filed for Chapter 11 bankruptcy. Users are still battling to get even a portion of their funds back as we speak.

Celsius — “If you don’t have free and unlimited access to your own funds, are they really *your* funds?”

Accompanying Mashinsky is a classic from Celsius Network, in which the firm was touting the whole “unbank yourself” catchphrase. The crypto lender often suggested it was more trustworthy than the banking system.

In a Nov. 14 tweet from 2019, Celsius Network tweeted, “If you don’t have free and unlimited access to your own funds, are they really *your* funds?” before adding:

“#UnbankYourself with Celsius and join the next generation of financial services — no fees, no penalties, no lockups, just profit.”

That statement hasn’t fared too well in 2022.

Amid its Chapter 11 bankruptcy process, users have had zero access to their locked-up funds, while profits are in doubt, too, considering they might not get all the funds back.

Voyager — “We have the experience to […] weather any bear market.”

Following a similar line to Celsius and Mashinky, fellow bankrupted crypto lender Voyager published a lengthy Twitter thread in June, which now looks a bit out of place as 2022 comes to a close.

In an attempt to assure customers that the company was safe during the bear market following the collapse of the Terra ecosystem, Voyager assured customers it carefully manages “risk” and its mission is to “make crypto as simple as safe as possible.”

“Our straightforward, low-risk approach to asset management is the result of our decades of experience leading companies through market cycles. We have the experience to back our decisions and weather any bear market.”

Over the next couple of weeks, it was widely reported that the company was facing liquidity issues, and by July 5, Voyager had filed for bankruptcy.

TechCrunch — “The collapse of ETH is inevitable”

Next in line is a tweet dating back to 2018 from fintech news outlet TechCrunch that reads: “The collapse of ETH is inevitable.”

The tweet is accompanied by an extremely bearish article in which the author, Jeremy Rubin, predicts that “ETH — the asset, not the Ethereum Network itself — will go to zero.”

Rubin, who disclosed at the end of the article that he was a Bitcoin (BTC) and Litecoin (LTC) hodler at the time, bizarrely suggests that if the Ethereum network completes everything on its roadmap, no one will have any use for the asset.

At the time of writing, however, Ether (ETH) sits at $1,196 and presents a host of reasons for people to want to hold it: staking rewards, borrowing, lending and deflationary tokenomics.

Additionally, it also serves utility purposes, such as pushing through transactions on the largest smart contract network on the market.

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Avraham Eisenberg — “What are you gonna do, arrest me?”

Avraham Eisenberg, the crypto trader behind the $110-million exploit of decentralized exchange Mango Markets, makes the list due to a tweet from October that looks terrible in current circumstances.

The tweet itself revolves around a rather harmless back-and-forth regarding Eisenberg’s incorrect use of the @inversebrah tag, with Sheik Swampert noting, “You don’t call inversebrah on yourself dude.”

In response, Eisenberg said, “What are you gonna do, arrest me?”

As of this week, Eisenberg has actually been arrested and is facing market manipulation charges over the Mango Markets exploit, which he had consistently maintained was “a highly profitable trading strategy” facilitated via “legal open market actions.”

As such, this tweet has fast become a popular meme that will most likely live on for a long time in Crypto Twitter folklore.

Fortune — SBF, the “next Warren Buffet”

American business magazine Fortune has also got itself on this list for speaking in glowing terms of SBF back in August.

In a Twitter thread, the publication labeled him the “de facto leader of the crypto community” before suggesting that he was the “next Warren Buffet, Crypto’s white knight” and “Prince of risk.”

Kevin O’Leary — “I’m going to use FTX to increase my allocation”

Shark Tank’s Kevin O’Leary, also known as Mr. Wonderful, makes the list for his backing of FTX and its former CEO, Sam Bankman-Fried.

O’Leary’s now-deleted tweet came on Aug. 10, 2021, after he signed a deal to become an FTX spokesperson. In the tweet, he emphasized:

“Finally solved my compliance problems with #cryptocurrencies I’m going to use FTX to increase my allocation and use the platform to manage my portfolios.”

Unfortunately for O’Leary, FTX was anything but compliant, and the millionaire said he has likely lost the entire $15 million he was paid to be FTX’s spokesperson after taxes, agent fees and all the crypto he kept on the exchange was lost after the firm’s bankruptcy.

7 biggest crypto collapses of 2022 the industry would like to forget

A look at some of the biggest disappointments in the crypto space from this year as the industry readies itself for better things to come.

2022 has been a bumpy year for the cryptocurrency market, with one of the worst bear markets on record and the downfall of some major platforms within the space. The global economy is beginning to feel the consequences of the pandemic, and clearly, this has had an influence on the crypto industry.

Below is a breakdown of some of the biggest disappointments in the crypto space this year.

Axie Infinity’s Ronin Bridge hacked

In March of this year, Ronin, the blockchain network that runs the popular nonfungible token (NFT) crypto game Axie Infinity, was hacked for $625 million. The hacker took 173,600 Ether (ETH) and 25.5 million USD Coin (USDC) from the Ronin bridge in two transactions.

When the Lazarus Group started its attack, five of the nine private keys for the Ronin Network’s cross-chain bridge were hacked. With this vote, they authorized two withdrawals totaling $25.5 million in USDC and 173,600 ETH.

According to the Ronin group, Axie Infinity’s issues began in November 2021, when its user base had expanded to an untenable size. Consequently, the corporation’s safety rules had to be relaxed to fulfill client demand. After the initial phase of fast development was completed, the firm reduced its safety procedures.

The main difficulty was a lack of a suitably decentralized network created by game developer Sky Mavis. The hacker acquired access to the private keys of five of Sky Mavis’ Ronin Chain’s nine validator nodes, enabling them to compromise the network. When the hackers gained control of five nodes, they essentially controlled over half of the network and were free to accept or deny whatever transactions they wanted. They obtained ETH and USDC via falsifying withdrawals.

The crime occurred on March 23, but it was only noticed on March 29, when a user reported being unable to withdraw 5,000 ETH from the Ronin bridge ATM. In the aftermath of the attack, Axie Infinity developers raised $150 million to reimburse the affected users.

TerraUSD/LUNA collapse

On May 7, when over $2 billion in TerraUSD (UST) was unstaked (removed from the Anchor Protocol), hundreds of millions of United States dollars were quickly liquidated. It’s unclear if this was a deliberate attack on the Terra blockchain or a response to rising interest rates. Because of the enormous outflow of cash, the price of UST fell from $1 to $0.91. As a result, market players started trading $0.90 in UST for $1 in LUNA.

When a considerable amount of UST was moved out, the stablecoin depegged. The availability of LUNA increased as more people sold their UST during the panic.

Following this fall, cryptocurrency marketplaces started to suspend trading pairs such as LUNA and UST. Following the initial accident in May, Do Kwon disclosed a rehabilitation plan for LUNA, and things seemed to improve. However, the currency’s value eventually fell. It was abandoned almost as soon as it began. Finally, Terra launched a whole new currency known as LUNA 2.0.

Investors lost a combined $60 billion due to the panic selling that accompanied the decline of TerraUSD Classic (USTC) and Luna Classic (LUNC), a related token.

On Sept. 14, a South Korean court issued an arrest warrant for Do Kwon. This happened four months after Terraform Labs’ LUNA and UST tokens collapsed. Do Kwon and five others were detained for allegedly violating regional market restrictions.

Three Arrows Capital collapse

When Terra collapsed, the crypto hedge fund Three Arrows Capital (3AC), which had a peak market valuation of more than $560 million, suffered significantly. 3AC had invested heavily in several troubled cryptocurrency projects, including the play-to-earn game Axie Infinity, which lost $625 million to a North Korean hack this year, and the centralized cryptocurrency exchange BlockFi, which laid off hundreds of employees in mid-June.

The UST collapse shattered investor confidence and expedited the slide of cryptocurrencies, which was already underway as part of a bigger flight from risk. A flood of margin calls from 3AC’s lenders sought repayment, but the firm lacked the funds to meet the requests. In addition, many of the company’s counterparties could not meet their investors’ expectations, many of whom were retail investors promised 20% annual returns.

Related: Santas and Grinches: The heroes and villains of 2022

The crypto hedge fund eventually collapsed after taking on major directional trades and borrowing from over 20 institutions, and the founders defaulted on its payments.

Because the founders would not appear in court, the lawsuit proceeded without them. In a leaked court document filed with the Singapore High Court, the Singapore government was asked to accept liquidation proceedings and work with liquidators. As liquidators try to wind down the failed crypto business of Three Arrows Capital, U.S. Bankruptcy Judge Martin Glenn has issued subpoenas to the company’s founders.

Voyager Digital’s fall

On July 6, prominent cryptocurrency investment firm Voyager Digital filed for bankruptcy after crypto hedge fund 3AC defaulted on a $650 million loan. 3AC received a significant loan from Voyager with no security. When 3AC defaulted on all of its obligations and its owners left, Voyager lost a significant sum of customer money.

Trading, withdrawals, and deposits were all suspended when Voyager reported that 3AC would not repay its loan. In June, Sam Bankman-Fried, billionaire CEO of trading firms FTX and Alameda Research, presented Voyager with a $500 million line of credit to help them weather the market collapse.

On July 5, 2022, Voyager Digital Holdings filed for bankruptcy in the Southern District of New York. According to Voyager Digital, the corporation owes between $1 billion and $10 billion to its more than 100,000 debtors. Despite its debts, however, the company believes it has assets worth between $1 and $10 billion. They also guarantee that adequate money is available to pay off the company’s unsecured creditors.

In a September court filing, insolvent cryptocurrency broker Voyager Digital revealed that it would auction off its remaining assets.

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Celsius crash and liquidity crisis

Celsius’s value plummeted on July 13, 2022, when one of the main crypto businesses, Celsius Network, declared bankruptcy. As the price of cryptocurrencies fell, investors on the Celsius network started withdrawing their Bitcoin (BTC) holdings in search of safer alternatives.

Consequently, panicked investors left Celsius in volume. Despite stating they were forced to do so due to “extreme market conditions,” Celsius Network halted BTC withdrawals, swaps and transfers on June 12. Users of the site understandably thought that Celsius had declared bankruptcy and would be unable to refund their money. The value of the Celsius cryptocurrency plummeted by 70% in only a few hours and fell further in the days that followed.

The crypto market has seen a significant sell-off due to the insecurity and falling prices of many major cryptocurrencies, which corresponded with the drop in the price of Celsius. In addition, due to escalating cash flow issues, Celsius announced 23% layoffs on July 3, 2022. When the time came, the company filed for bankruptcy on July 13, 2022.

Celsius had total liabilities of $6.6 billion and assets of $3.8 billion, resulting in a $1.2 billion hole in the company’s balance sheet due to the court ruling.

FTX collapse

FTX and its U.S. equivalent, FTX.US, filed for Chapter 11 bankruptcy on Nov. 11. The exchanges collapsed due to a lack of liquidity and money mismanagement, resulting in a large number of withdrawals from fearful investors.

Following the announcement of bankruptcy, FTX.US briefly restricted withdrawals on Nov. 11, despite earlier promises that FTX.US would be unaffected by FTX’s liquidity concerns. On the evening of Nov. 11, an alleged hack took more than $600 million from FTX wallets. The assault was revealed by FTX in its assistance channel on the instant-messaging network Telegram.

According to some Twitter users, hackers were also attempting to get access to FTX-linked bank accounts. Plaid, a company that connects consumer bank accounts with financial applications, responded to “concerning public reports” by denying FTX access to their products, claiming that they had no proof that their tools had been used unlawfully.

Bankman-Fried was arrested in the Bahamas on Dec. 12 at the request of the U.S. government, which wanted him extradited for eight criminal offenses, including wire fraud and conspiracy to defraud investors. Bankman-Fried was eventually deported to the United States and is awaiting trial after posting a $250 million bail.

BlockFi bankruptcy

The collapse of FTX earlier in the month generated fear and uncertainty across the market. BlockFi, another cryptocurrency exchange, filed for Chapter 11 bankruptcy on Nov. 28. With assets and liabilities ranging from $1 billion to $10 billion, the firm had over 100,000 creditors. In addition, they had a $275,000,000 debt to Sam Bankman-Fried’s American subsidiary, FTX US. The application shows that the largest client has a balance of $28 million.

Following the demise of Three Arrows Capital, multiple firms, including the crypto company that operates a trading exchange and an interest-bearing custodial service for cryptocurrencies, had serious liquidity issues.

Related: Women who made a contribution to the crypto industry in 2022

BlockFi agreed earlier this year to accept a credit package from FTX worth up to $400 million to help it weather a liquidity restriction caused by the exchange’s exposure to the TerraUSD stablecoin’s collapse. As a result of these concerns, BlockFi was reliant on the performance of the cryptocurrency exchange FTX, which may now jeopardize its financial stability.

While 2022 may have been a tough year for the crypto market, there may be a silver lining. Investor sentiment seems to be improving, and the crypto market has always recovered from previous bear markets and platform collapses. The events of 2022 could pave the way for new platforms to learn from the mistakes of their predecessors.

Crypto can get weird: The 5 strangest stories of the industry in 2022

Filmmakers are interested in documenting one of this year’s weirdest stories in crypto, but what else made the list?

From Terra to FTX, 2022 has given us many weird crypto stories. While investors have been enduring a bear market that saw the crypto industry sink below the $1 trillion market capitalization mark, adoption in the space has been growing, and old mysteries were finally solved.

From the incredible short squeeze of a bankrupt company’s token to old anti-crypto arguments used by a major central bank, we’re getting weird with five stories the best fiction writers couldn’t dream up.

“Comedic rapper” charged over Bitfinex hack

Back in 2016, popular cryptocurrency exchange Bitfinex suffered a major security breach that saw attackers steal 119,756 Bitcoin (BTC), worth approximately $72 million at the time. It was one of the largest crypto hacks in history, and although Bitfinex continued operating, its reputation was damaged for years to come.

This year, Heather Morgan, known by her rap name “Razzlekhan,” and her husband Ilya Lichtenstein were arrested by the Federal Bureau of Investigation for allegedly conspiring to launder crypto connected to the Bitfinex hack.

During a court appearance in New York, the pair proclaimed their innocence and were released on multimillion-dollar bonds. The weird part of this story is the details surrounding Morgan’s work as a “comedic rapper” and social media influencer. One of her songs even says it is dedicated to “the entrepreneurs and hackers, all the misfits and smart slackers.”

Morgan, who calls herself the “crocodile of Wall Street,” was labeled a master of “deceit and deception” by federal authorities. While her home was being searched, Morgan allegedly asked federal agents for permission to retrieve her cat from under the bed and, while doing so, tried to lock her phone.

Morgan and Lichtenstein reportedly traveled to Ukraine in 2019 to attain false identities and create fake passports, and have “established financial accounts” in Ukraine and Russia.

She was a regular contributor to Forbes. The day before the Bitfinex hack, she posted a picture next to Lichtenstein with a caption saying she will “always love getting into trouble w/ this crazy guy.”

Commenting on Morgan and Lichtenstein’s arrest, Dymtro Volkov, head of global innovations at crypto exchange CEX.io, told Cointelegraph that with the proper technical resources, “it is possible to track the flow of most funds moving on a blockchain network” and that “hiding a huge amount of stolen funds is actually quite a complex task.”

Notably, the pair isn’t being charged with the hack but laundering the stolen funds. The sordid details of the story have even caught the interest of filmmakers. Hulu is producing a true-crime limited series about Morgan’s life, and Netflix has ordered a docuseries on the story.

Bankrupt Celsius Network’s CEL token surges 4,000%

Shortly after cryptocurrency lending platform Celsius Network filed for bankruptcy, the price of its native utility token, CEL (CEL), jumped by more than 4,100%. In only two months, the price climbed from a bottom of $0.093 to a near $4 high.

The surge came amid rumors that Ripple, a company engaged in a legal battle with the United States Securities and Exchange Commission, could take over Celsius’ assets. Other rumors suggested Goldman Sachs planned to acquire Celsius for $2 billion.

Traders organized a massive short squeeze. Short squeezes occur when an asset’s price rises suddenly, forcing short sellers to buy back the asset at a higher price to close their positions.

The short squeeze was possible because a freeze on Celsius token transfers significantly reduced the circulating supply of CEL.

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Click “Collect” below the illustration at the top of the page or follow this link.

At the time of the short squeeze, Cointelegraph reported that FTX had about 5.1 million CEL tokens, amounting to 90% of the total circulating supply on exchanges.

It’s currently believed traders on FTX pulled off the short squeeze, but deleted tweets suggest that the origins of the movement may not be fully understood, and some believe Alameda Research was directly involved. We do know that at least some traders are still trying to get a CEL short squeeze going again, even after the token dropped to $0.50.

Binance’s letter of intent

Binance’s surprising letter of intent to acquire the collapsing FTX exchange is another weird story of 2022. At the time, many in crypto believed FTX was a solvent, well-run company. When Binance announced its intent to liquidate its holdings of FTX Token (FTT) following speculation regarding the solvency of FTX, what was seen as a rivalry between Binance and FTX soon turned into a potential buyout no one was expecting.

As FTX’s solvency was hardly being questioned, CEO Sam Bankman-Fried announced an “agreement on a strategic transaction” with Binance. It was a weird and unexpected revelation because, until that point, Bankman-Fried had dismissed concerns about the solvency of FTX.

Binance CEO Changpeng Zhao added to those concerns when he tweeted, “This afternoon, FTX asked for our help. There is a significant liquidity crunch. To protect users, we signed a non-binding LOI, intending to fully acquire FTX.com and help cover the liquidity crunch. We will be conducting a full DD in the coming days”.

The deal fell through the next day after Binance conducted its due diligence, with the reasons becoming clear soon after.

European Central Bank spreads FUD

In late November, the European Central Bank (ECB) published a blog post in which it argued that Bitcoin’s recovery from $17,000 to $20,000 was likely an “artificially induced last gasp before the road to irrelevance.”

The ECB said that Bitcoin is “rarely used for legal transactions” and that “real Bitcoin transactions are cumbersome, slow and expensive.” The central bank daringly wrote that Bitcoin has never been used “to any significant extent for real-world legal transactions.”

Related: The most eco-friendly blockchain networks in 2022

According to the ECB, Bitcoin has benefited from “waves of new investors” while not being suitable as an investment. It doesn’t generate cash flow or dividends, nor can it be productively used or “provide social benefits.”

The statement argues that blockchain technology has “created limited value for society” and that the “Bitcoin system is an unprecedented polluter.” It also suggested that cryptocurrency promotion bears a “reputational risk for banks.”

Every point the ECB brought up has been used to attack the cryptocurrency community, and every single point has been rebuffed.

The ECB has recycled several crypto myths that have been used to hold the industry back. The post comes as the ECB accelerates progress on developing a digital euro. One of the post’s authors, Ulrich Bindseil, has authored numerous posts on central bank digital currencies.

Besides the recycled myths, what’s weird is the ECB’s unclear angle, as many don’t consider CBDCs to be competing with cryptocurrencies, which are often seen as a way to exit the shortcomings of fiat currency systems.

Speaking to Cointelegraph, Anton Bukov, co-founder of 1inch Network, said the ECB’s post was good for the cryptocurrency community, as it means the “government came to the second or even third stage of Gandhi’s thought: First they ignore you, then they laugh at you, then they fight you, then you win.”

Central African Republic’s crypto plan

The Central African Republic (CAR) became the second country to adopt Bitcoin as a legal tender earlier this year, allowing around 5 million residents to use the flagship cryptocurrency alongside the country’s fiat currency, the Central African CFA franc.

The move came after Central African Republic President Faustin-Archange Touadéra signed a bill into law establishing a regulatory framework for Bitcoin as legal tender. While the crypto community initially celebrated the move, the weird side of this soon became apparent.

Although the CAR is a mineral-rich nation, its people are among the poorest in the world. It has been devastated by a decade-long civil war, and it is estimated that nine out of 10 residents don’t even have access to the internet. CAR’s decision was accompanied by little to no explanation, with President Touadéra tweeting a simple “more to follow.”

The tweet was referring to an anouncement about the country’s “visionary” plan to create a “fantastic opportunity for anyone who believes in crypto investing.” That opportunity is the Sango project, which appears to now be an initial coin offering for the country’s CBDC.

The project claims that the country’s treasury will have a dedicated Bitcoin reserve and allow citizens to have a “voice and chance to shape the future” through a governance system. Citizenship can be acquired by locking fixed collateral in Sango. Other benefits include e-residency, land ownership and 0% income tax for digital assets.

While attracting foreign investment is an intelligent move from CAR, a Bitcoin-based initial coin offering from a war-torn country is a weird development. CEX.io’s Volkov told Cointelegraph that cryptocurrencies are “well positioned to help emerging economies fill gaps in the services their domestic financial systems are lacking” and could help connect domestic financial systems to global markets. Volkov added that the move may help the country’s economy:

“Making crypto legal tender, or at least creating a legal framework that defines its usage, allows financial companies to introduce cheap and fast financial services that customers can access even with unreliable access to the internet.”

He also said cryptocurrencies can have a “hugely positive effect on countries with developing financial systems looking to participate in the global economy.”

The stories covered in this article make it clear how unpredictable the cryptocurrency space can be during bear and bull markets. If anything, anyone following what’s going on is enjoying a rollercoaster ride they will never forget.