Crypto Winter Gets Icier Just Days Into New Year

Cryptocurrency coins over a tablet displaying a trading app

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Less than a week into the New Year, the cryptocurrency winter is turning icier as job cuts mount, regulators turn up the heat and firms warn of losses--and there's little sign the tumult will ebb anytime soon.

Key Takeaways

  • A raft of negative crypto news defined the start of 2023.
  • Former FTX CEO Sam Bankman-Fried filed a request to keep his 56 million shares of the consumer trading app Robinhood, valued at roughly $450 million, to pay for his legal fees.
  • In the first week of 2023, crypto lender Genesis cut 30% of its staff, crypto-focused bank Silvergate Capital Corp. fired 40%, and crypto exchange Huobi let 20% of its employees go.
  • Regulators stepped up warnings to banks to be aware of the risks associated with crypto.

Genesis, Silvergate, China's Huobi ax workers

Crypto lender Genesis axed 30% of its staff, the second round of job cuts in recent weeks, and is considering bankruptcy after losing $175 million locked up in a trading account at the failed trading platform FTX. Genesis also owes $900 million to crypto exchange Gemini, which has criticized how Genesis is handling the financial crisis. 

Silvergate Capital Corp., a crypto-focused California bank, fired 40% of its employees after investors scrambled to redeem $8.1 billion at the bank in the wake of FTX's collapse. Silvergate held deposits for FTX units and Alameda Research, the trading firm behind FTX. Meantime, Chinese crypto exchange Huobi said it plans to ax about 20% of its staff. "With the current state of the bear market, a very lean team will be maintained going forward," Huobi said in a statement.

Due to the FTX collapse in late 2022, Coinbase cut 18% of its staff, Kraken lost almost one-third of its employees, and lay off 5% of its staff.

Court Drama And Crypto

In New York, Coinbase Global Inc., a crypto exchange, agreed to pay $100 million to settle claims by New York state that it failed to comply with anti-money-laundering rules. And a U.S. court ruled that the now-bankrupt crypto firm Celsius can keep all its customer's crypto deposits, meaning that clients can't recover their funds from the defunct exchange. The ruling reinforces a ground rule for crypto investors: "not your keys, not your crypto," which essentially means investors can't be sure that their holdings are protected unless they keep them in a crypto wallet that they own and control.  

SBF Tries to Hold Onto $450 Million Robinhood Stake

The disruption stems mostly from the saga of FTX, whose former CEO, Sam Bankman-Fried has pleaded not guilty to fraud charges after his company's implosion in November. The disgraced tycoon said in a filing this week that he wants to maintain control of his 56 million shares of the consumer trading app Robinhood, valued at roughly $450 million, to help pay for his legal defense. In a Dec. 22 bankruptcy filing, FTX argued that because there are so many creditors seeking ownership of the shares, "the asset should be frozen until this court can resolve the issues in a manner that is fair to all creditors of the debtors." 

Regulators Warn Banks of Crypto Risks

Peering into the murk are federal regulators, who until recently have been reluctant to step into the crypto mess. The Federal Reserve, Federal Deposit Insurance Corp. (FDIC), and the Office of the Comptroller of the Currency warned banks in a joint statement this week to be aware of risks tied to cryptocurrency assets, including legal uncertainties and misleading disclosures.

The Bottom Line

Against this backdrop, crypto prices are going nowhere in a hurry. The value of most major cryptocurrencies is down or flat versus the latest week, with Bitcoin trading around $16,850 at midday Friday New York time, 75% lower from its all-time high reached in November 2021.

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  1. Reuters. “Crypto Exchange Huobi to Cut Staff 20% in 'Bear Market

  2. U.S. Bankruptcy Court for the District of Delaware. “Opposition to FTX Debtor's Motion to Enforce the Automatic Stay or, in the Alternative, Extend the Automatic Stay," Page 2.

  3. U.S. Bankruptcy Court for the District of Delaware. “Debtors' Motion to Enforce the Automatic Stay or, in the Alternative, Extend the Automatic Stay," Page 2.

  4. CoinMarketCap. ''Today's Cryptocurrency Prices by Market Cap."

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