The 2022 crypto crash was a harsh reality check for many Bitcoin moguls who had become used to the digital currency’s stratospheric rise in value.
The cryptocurrency crash of 2022 left a trillion-dollar dent in the market, and many billionaire investors were hit hard. Some filed lawsuits to demand compensation for their losses, and some were so devastated that they even tried to take their own lives. According to Statista research, the most prominent crypto billionaires lost a collective US$112.7 billion by December 1, 2022. Sam Bankman-Fried, CEO of FTX exchange and Alameda Research, became emblematic of this catastrophe after filing bankruptcy in November 2022 for both businesses following their public demise. Many have likened his story to that of Bernie Madoff’s: one of riches and notoriety turned to disaster in the public eye.
In this article, we investigate the financial damage endured by these high-profile crypto kings as a result of the market collapse. Interestingly, the four crypto chiefs who lost the most money in 2022 were previously considered among the richest people in the crypto world.
Changpeng Zhao (CZ)
Changpeng Zhao, commonly known as CZ, has long held the title of the richest man in crypto. His wealth is greatly tied to his stake in Binance, the largest crypto exchange by trading volume, as well as an unconfirmed amount of Binance Coin tokens and other cryptos.
However, when the cryptocurrency market crashed in 2022, CZ suffered the biggest loss, with his wealth dropping a staggering US$87 billion, according to the Bloomberg Billionaires Index. His net worth fell to US$11 billion in May 2022, and now he holds the record for the biggest monetary loss in history. His demise surpassed Softbank founder Masayoshi Son’s previous record of margin call-related losses of US$77 billion during the dot-com bubble crash.
Despite the choppy waters in the crypto market in recent months, CZ has high hopes for the future of crypto, saying that the market had “shown extreme resilience”. Hopefully, CZ will make a full recovery once crypto markets eventually rebound.
The founder of Coinbase, Brian Armstrong, was not exempt from the market’s crash last year. His net worth reduced significantly to US$2.2 billion after he lost US$13.7 billion. Coinbase also had a tough year due to the decrease in users and investors which caused their share value to plummet.
In reaction, in June 2022, the company announced significant layoffs, with 1,100 employees losing their jobs, accounting for nearly 18% of its total workforce. Armstrong attributed this to the economic downturn in America as well as the “crypto winter”. He divulged they had been too ambitious in expanding from 1,250 staff members at the start of 2021 to around 5,000 in three months.
To emphasize how difficult it had been, Coinbase’s stocks fell more than 89% in 2022, and revenue for Q3 fell by about three-quarters of its height when Bitcoin rates were highest in 2021.
Once valued at US$5.9 billion in March 2022, FTX co-founder Gary Wang’s fortune had dropped to zero by December 2022. The U.S. Securities and Exchange Commission (SEC) and the Commodities Futures Trading Commission (CFTC) accused him and former Alameda Research CEO Caroline Ellison of fraud. Both plead guilty to federal fraud charges previously brought forth by the Department of Justice (DOJ).
According to SEC statements, Wang and Ellison were in a multiyear scheme to defraud investors in FTX with their supposedly “inappropriately organized” setup that allowed them access to funds without proper control, leading to them making larger trades than they should have had. In their plea agreement, both agree to cooperate with authorities going forward.
Sam Bankman-Fried (SBF), the 30-year-old CEO of crypto exchange FTX, has been thrust into the limelight following the collapse of both his businesses—FTX and Alameda Research—in November 2022.
In 2017, SBF founded Alameda Research and made a massive impact on the cryptocurrency trading industry. He then followed up this success with the launch of FTX in 2019, which quickly grew to be the world’s third-largest exchange and attracted venture funding of US$2 billion. With his fortune skyrocketing due to the crypto market surge in 2021, he gained celebrity status. However, this all changed on November 2, 2022, when CoinDesk published an article raising questions about Alameda and FTX’s financial health.
This provoked a sell-off of FTT tokens by Zhao who held over US$580 million worth of them, leading to an 80% price drop and a consequent bank run of investors withdrawing billions from the platform. The growing liquidity shortfall soon led to a US$8 billion gap that dismantled SBF’s empire and caused FTX to declare bankruptcy within days. He is now being probed by both regulators for possible links between FTX and Alameda.
This unfortunate incident caused investors to compare SBF to the infamous Wall Street banker Bernie Madoff, who was convicted of fraud in 2008. Madoff orchestrated one of the most extensive financial schemes in history, resulting in a loss of more than US$20 billion. Bankman-Fried had similarly violated customer trust, misled others and disrupted the crypto community at large—an outcome that is reminiscent of Madoff’s past crimes.
The 2022 crypto crash has left many investors feeling burned, but it is important to remember that this does not spell the end of cryptocurrency as a whole. The industry’s biggest players have suffered major losses, but for those willing to take risks and put in the work, there are still great opportunities out there.
Remember, the road to success is a risky one.
Header image courtesy of Freepik