Crypto firms off to rocky start in 2023 with outflows, layoffs and a lawsuit
The crypto industry's woes continued on Thursday as plunging deposits, layoffs and a lawsuit added to the tumult of 2022, which was dominated by sinking prices and high-profile bankruptcies.
The fallout from the collapse of crypto exchange FTX and criminal charges leveled against its founder Sam Bankman-Fried weighed heavily on the sector this week. Among those hit were Genesis Global Capital, which laid off staff, and crypto-focused Silvergate Bank, which reported a large fall in deposits.
Bankman-Fried on Tuesday pleaded not guilty to eight criminal counts including wire fraud and money laundering conspiracy. The 30-year-old is accused of looting FTX customers' deposits to support his Alameda Research hedge fund, buy real estate and donate millions of dollars to political causes.
Another crypto entrepreneur, Alex Mashinsky, the founder and former CEO of Celsius Network, also encountered a legal battle on Thursday. A new lawsuit filed by New York's attorney general alleges Mashinsky defrauded investors by concealing the failing health of his now-bankrupt cryptocurrency lending platform.
While Mashinsky was CEO between 2021 and 2022, Celsius made roughly a billion dollars in loans to Alameda Research, according to the lawsuit.
The civil lawsuit seeks to ban Mashinsky from doing business in New York and have him pay damages for violating state laws. “It serves as a shot across the bow to other founders of entities like this," said Todd Phillips, founder of Phillips Policy Consulting LLC.
Meanwhile, Silvergate Capital Corp reported a sharp drop in fourth-quarter crypto-related deposits on Thursday as investors spooked by the FTX collapse pulled out more than $8 billion, sending shares of the bank down more than 43 percent.
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