Most notable crypto bankruptcies in 2023

Explore the list of crypto bankruptcies in 2023, including detailed insights into the collapse of major exchanges.

It’s quite evident that crypto had one of its worst years in 2022. The cascading collapse of two industry giants, Terraform Labs (responsible for LUNA and UST) and FTX, drove one of the harshest crypto winters in recent history. It eventually led to many bankruptcies, layoffs, and shutdowns across the market.

So, 2023 mostly saw the fallout from the previous years, as the major bankruptcy proceedings from previous market leaders like Celsius, Voyager, Three Arrows Capital (3AC), BlockFi, and FTX progressed into different stages. Still, some notable crypto bankruptcies and exchange failures made it into the news.

Let’s take a look at the list of crypto bankruptcies and failures of 2023.

Notable crypto bankruptcies

Genesis

The year 2023 began under a cloud for the cryptocurrency sector, with Genesis, a prominent crypto lending subsidiary of Digital Currency Group, declaring bankruptcy. The company’s troubles began in mid-2022 following a significant loan loss to an unnamed counterparty, later identified as Three Arrows Capital, another entity that filed for bankruptcy in July 2022.

Genesis’s vulnerabilities were further exposed by the collapse of FTX and Alameda Research in November 2022. This downfall had a domino effect on Genesis, which had $175 million in assets locked on FTX and a lending relationship with Alameda. The impact of these collapses was immediate and severe, leading Genesis to halt redemptions at its lending unit, signaling deep financial distress.

Finally, in January 2023, the company filed for Chapter 11 bankruptcy and, subsequently, an 83-page bankruptcy plan.

Core Scientific

Core Scientific, previously a leading publicly traded crypto mining company in the United States, filed for Chapter 11 bankruptcy in December 2022, right before the onset of 2023. The company cited declining Bitcoin (BTC) prices, escalating energy costs, and an unpaid debt of $7 million from Celsius Network, another bankrupt crypto lender, as primary reasons for its financial woes.

Despite these challenges, Core Scientific managed to negotiate a ray of hope. In late December 2023, the company announced an in-principal agreement with shareholders. This agreement involved the distribution of convertible notes and stock, with plans for a potential relisting on the NASDAQ exchange by mid-January 2024. This move indicated a strategic attempt to navigate its financial difficulties and signaled a potential path to recovery.

Babel Finance

While not filing for bankruptcy, Hong Kong-based crypto lender Babel Finance found itself in troubled waters, requiring extended creditor protection in Q2 2023. The company faced significant challenges following its abrupt suspension of client withdrawals in April. These issues were compounded by substantial losses incurred through proprietary trading with customer funds.

According to its restructuring proposal deck, Babel Finance lost over $280 million in Bitcoin and Ether (ETH). This staggering loss, amounting to around 8,000 BTC and 56,000 ETH, resulted from liquidation events triggered by a significant downturn in the market in June.

Crypto exchange bankruptcies (2023)

Crypto exchanges experienced harsh regulatory scrutiny in 2023, especially in key regions like the U.S. and UK. KuCoin announced its exit from the New York market, citing regulatory challenges.

Meanwhile, Binance entered into a historic settlement with the DOJ over criminal charges and ended onboarding new users in the UK. However, regarding complete shutdowns, the following platforms were most notable.

Bittrex Global

Bittrex Global, a well-regarded crypto exchange, announced the cessation of its operations just months following the shutdown of its U.S. arm. This decision, announced in early December, signaled a major player’s notable retreat from the market.

Bittrex Global, regulated in Lichtenstein and Bermuda, urged its customers to complete necessary transactions by early December, after which only withdrawals would remain available. The exchange, however, did not disclose specific reasons for this decision, leaving room for speculation regarding the underlying causes.

Txbit

Txbit, a Netherlands-based cryptocurrency exchange, also announced its shutdown in 2023. The firm attributed its closure to uncertain regulatory conditions and adverse market shifts, which rendered its business model unprofitable.

In a detailed announcement, Txbit expressed that rising compliance costs and constant pressure on product margins were key factors that led to its decision to cease operations.

Bitfront

Bitfront, a U.S.-based crypto exchange backed by Japanese social media giant Line Corp, announced its decision to cease operations early in 2023. This announcement came despite the exchange’s efforts to navigate the challenges in the rapidly evolving crypto industry. Bitfront suspended new sign-ups and credit card payments as a precursor to its complete shutdown.

In its statement, Bitfront cited the need to focus on growing the LINE blockchain ecosystem and LINK token economy as a primary reason for its decision. This strategic shift reflects the broader trend within the crypto industry, where companies increasingly focus on core strengths and long-term viability in response to market and regulatory pressures.

Major crypto layoffs in 2023

Blockchain.com: substantial reduction in workforce

Blockchain.com, a well-known crypto brokerage, faced significant downsizing in 2023, reflecting the broader industry trend of layoffs. The company announced a 28% reduction in its workforce, equating to approximately 110 employees. This decision followed a previous round of layoffs in the summer, where an additional 150 staff members were let go, and the closure of its Argentina offices.

These layoffs at Blockchain.com were a response to the broader market downturn and the need to streamline operations in a challenging financial environment. However, in December 2023, the company announced it would increase its workforce by 25% amid expansion to Nigeria and Turkey.

Coinbase: navigating a restructuring phase

Coinbase, the largest U.S. crypto exchange, undertook a significant restructuring in 2023, which included laying off around 20% of its staff, amounting to about 950 employees. This decision was part of a broader cost-cutting strategy implemented by the exchange. By the end of September, the company had approximately 4,700 employees, indicating the scale of its downsizing efforts.

Coinbase’s challenges in turning a profit amidst decreased investor trading activity were a primary driver behind these layoffs. Additionally, the exchange agreed to pay a $50 million penalty to New York State’s Department of Financial Services to settle accusations of insufficient background checks on customer accounts.

Crypto.com: series of workforce reduction

Crypto.com, one of the leading exchanges, experienced significant layoffs in 2023, cutting a fifth of its global workforce. This was the second round of layoffs for the exchange within six months. Reports indicated that some staff members discovered their layoff when disconnected from online meetings or removed from company systems.

The layoffs at Crypto.com were partly attributed to the aftermath of the FTX collapse in November, which triggered heavy withdrawals across several crypto exchanges. Additionally, a misstep involving a roughly $400 million transaction further complicated matters for the exchange.

Digital Currency Group: downsizing and strategic shifts

The Digital Currency Group (DCG), a prominent crypto conglomerate, announced the closure of its wealth-management division, HQ. This move was part of a strategic shift within DCG, including properties like Genesis Global Capital, Grayscale, and the crypto-focused media company CoinDesk.

The decision to shut down HQ came amidst a broader reassessment of DCG’s holdings. The company also explored options for CoinDesk, including a potential sale, following multiple unsolicited offers exceeding $200 million. These developments at DCG demonstrate the shifting priorities within the crypto industry as companies seek to adapt to an evolving market and regulatory landscape.

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