Explore our list of cryptocurrency bankruptcies in 2023, including detailed insights into major exchange collapses.
It is clear that 2022 has been the worst year for cryptocurrencies. The serial collapse of two industry giants, Terraform Labs (responsible for LUNA and UST) and FTX, ushered in one of the harshest cryptocurrency winters in recent history. Ultimately, there were many bankruptcies, layoffs, and closures across the market.
2023 will therefore see most of the fallout compared to previous years, with major insolvency proceedings for former market leaders such as Chelsea, Voyager, Three Arrows Capital (3AC), BlockFi and FTX progressing through various stages. Nonetheless, some notable cryptocurrency bankruptcies and exchange failures have made the news.
Let’s take a look at the list of cryptocurrency bankruptcies and failures in 2023.
Notable Cryptocurrency Bankruptcies
Genesis
2023 started on a cloud for the cryptocurrency sector, with Genesis, the popular cryptocurrency lending arm of Digital Current Group, declaring bankruptcy. The company’s troubles began in mid-2022 due to significant loan losses to unnamed counterparties. It was later identified as Three Arrows Capital, another company that filed for bankruptcy in July 2022.
Genesis’ vulnerabilities were further exposed by the collapse of FTX and Alameda Research in November 2022. The downfall had a domino effect on Genesis, which had $175 million in assets locked up in FTX and had a lending relationship with Alameda. The impact of this collapse was immediate and severe, causing Genesis to halt repurchases of its loan division, heralding severe financial difficulties.
Finally, in January 2023, the company filed for Chapter 11 bankruptcy and subsequently filed an 83-page bankruptcy plan.
core science
Core Scientific, previously a leading publicly traded U.S. cryptocurrency mining company, filed for Chapter 11 bankruptcy in December 2022, shortly before the start of 2023. The company cited falling Bitcoin (BTC) prices, rising energy costs, and outstanding debt. Another bankrupt cryptocurrency lender cited $7 million from Celsius Network as the main reason for its financial problems.
Despite these challenges, Core Scientific has managed to negotiate a glimmer of hope. In late December 2023, the company announced a major agreement with shareholders. The agreement included the distribution of convertible notes and shares, with plans for a potential relisting on the Nasdaq exchange by mid-January 2024. The move represented a strategic attempt to navigate financial difficulties and signaled a potential path to recovery.
Babel Finance
Hong Kong-based cryptocurrency lender Babel Finance has not filed for bankruptcy, but is in trouble, demanding an extension of creditor protection in the second quarter of 2023. The company faced serious challenges after customer withdrawals suddenly stopped in April. These problems were further complicated by the significant losses incurred through self-dealing with client funds.
Babel Finance has lost more than $280 million in Bitcoin and Ethereum (ETH), according to the restructuring proposal. This massive loss, amounting to approximately 8,000 BTC and 56,000 ETH, was caused by a liquidation event triggered by a severe downturn in the markets in June.
Cryptocurrency exchange bankruptcy (2023)
Cryptocurrency exchanges have come under intense regulatory scrutiny in 2023, especially in key regions such as the US and the UK. KuCoin announced its withdrawal from the New York market, citing regulatory concerns.
Meanwhile, Binance signed a historic settlement with the Department of Justice over criminal charges and ended onboarding new users in the UK. However, the most noteworthy platforms in terms of complete closure are:
Bittrex Global
Bittrex Global, a well-known cryptocurrency exchange, announced the suspension of operations just months after closing its US branch. The decision, announced in early December, heralded a notable retreat from the market by a major company.
Bittrex Global, which is regulated in Liechtenstein and Bermuda, urged customers to complete the required transactions by early December, after which only withdrawals would be allowed. However, the exchange did not disclose a specific reason for this decision, leaving room for speculation about the root cause.
Txbit
Netherlands-based cryptocurrency exchange Txbit also announced closure in 2023. The company said uncertain regulatory conditions and adverse market changes had made its business model unprofitable.
In a detailed announcement, Txbit said increasing compliance costs and continued pressure on product margins were key factors in its decision to cease operations.
bitfront
Bitfront, a US-based cryptocurrency exchange backed by Japanese social media giant Line Corp, announced its decision to cease operations in early 2023. This announcement comes despite the exchange’s efforts to address the challenges of the rapidly evolving cryptocurrency industry. Bitfront has suspended new sign-ups and credit card payments as a prelude to a complete shutdown.
In a statement, Bitfront cited the need to focus on growing the LINE blockchain ecosystem and LINK token economy as the main reasons for its decision. This strategic shift reflects a broader trend in the cryptocurrency industry, where companies are increasingly focusing on their core strengths and long-term viability in response to market and regulatory pressures.
Major Cryptocurrency Layoffs in 2023
Blockchain.com: Significant reduction in workforce
Blockchain.com, a well-known cryptocurrency brokerage, is facing significant downsizing in 2023, reflecting a broader industry trend of layoffs. The company announced it was reducing its workforce by 28%, cutting approximately 110 employees. This decision follows the layoffs of an additional 150 employees and the closure of its Argentina branch last summer.
These layoffs at Blockchain.com were a response to a widespread market downturn and the need to streamline operations in a difficult financial environment. However, in December 2023, the company announced that it would increase its workforce by 25% as it expanded into Nigeria and Turkey.
Coinbase: Navigating the Restructuring Stages
Coinbase, the largest U.S. cryptocurrency exchange, has undertaken a major restructuring in 2023, which includes laying off about 950 employees, or about 20% of its workforce. This decision was part of a broader cost-cutting strategy implemented by the exchange. By the end of September, the company had about 4,700 employees, indicating the scale of its downsizing efforts.
Coinbase’s struggles to generate revenue amid declining investor trading activity were the main reason for these layoffs. The exchange also agreed to pay a $50 million fine to the New York State Department of Financial Services to resolve accusations that it conducted insufficient background checks on customer accounts.
Crypto.com: A series of workforce cuts
Crypto.com, one of the leading exchanges, experienced large-scale layoffs in 2023, cutting a fifth of its global workforce. This was the exchange’s second layoff in six months. Some employees found themselves terminated when online meetings were disconnected or removed from company systems, according to the report.
Crypto.com’s layoffs occurred in part in the aftermath of the FTX collapse in November, which led to massive withdrawals from several cryptocurrency exchanges. Additionally, mistakes involving about $400 million in transactions further complicated the exchange’s problems.
Digital Currency Group: Downsizing and Strategic Shift
Prominent cryptocurrency giant Digital Currency Group (DCG) has announced the closure of its asset management division headquarters. The move was part of a strategic shift within DCG that included assets such as Genesis Global Capital, Grayscale and cryptocurrency-focused media company CoinDesk.
The decision to close the headquarters comes amid a broader reassessment of DCG’s holdings. The company also explored options for CoinDesk, including a potential sale following multiple unsolicited offers worth more than $200 million. These developments from DCG demonstrate shifting priorities within the cryptocurrency industry as companies seek to adapt to the evolving market and regulatory environment.
frequently asked questions
What happens if a cryptocurrency exchange goes bankrupt?
If a cryptocurrency exchange goes bankrupt, customer assets may be at risk and users may have difficulty withdrawing funds depending on the exchange’s bankruptcy procedures and asset protection measures.
Which cryptocurrency exchanges will fail in 2023?
Bittrex Global, Txbit, and Bitfront were notable cryptocurrency exchanges that collapsed in 2023.
Which cryptocurrencies went bankrupt?
In 2023, Genesis, Core Scientific, and Babel Finance (not officially bankrupt, but experiencing significant financial difficulties) were among the major cryptocurrency companies that went bankrupt.