The cryptocurrency industry, known for its volatility and regulatory challenges, has recently seen an upsurge in bankruptcies from both large and small-scale players. This uncertain climate, coupled with the drastic drop in the price of Bitcoin and the unprecedented bankruptcies, has cast a dark shadow over the once-robust cryptocurrency market, underscoring the need for increased scrutiny and regulatory oversight.
In total, more than 12 major cryptocurrency-related companies have filed for bankruptcy over the past year. These companies include Bittrex, Mirror Trading, Genesis Global, Core Scientific, GK8, Symbiont.io, BlockFi, FTX, Compute North, Celsius Network, Voyager Digital, and Three Arrows Capital.
Dgtl Infra provides a detailed overview of 12 major cryptocurrency and blockchain technology companies that have filed for Chapter 11 reorganization and Chapter 15 liquidation in United States bankruptcy courts since mid-2022. We specifically discuss each company’s bankruptcy filing, financial difficulties, legal troubles, and regulatory challenges, as well as the impacts from other bankrupt companies in the cryptocurrency ecosystem.
Cryptocurrency Bankruptcies
Below is a table, followed by comprehensive descriptions, which outlines the specific details of each bankruptcy case involving 12 major companies in the cryptocurrency and blockchain technology sector.
| # | Company Name | Filing Date | Description |
| 1 | Bittrex | 5/8/2023 | Cryptocurrency Exchange |
| 2 | Mirror Trading International | 2/9/2023 | Cryptocurrency Fund Manager |
| 3 | Genesis Global | 1/19/2023 | Cryptocurrency Financial Services |
| 4 | Core Scientific | 12/21/2022 | Cryptocurrency Mining |
| 5 | GK8 | 12/7/2022 | Blockchain Security |
| 6 | Symbiont.io | 12/1/2022 | Blockchain Technology |
| 7 | BlockFi | 11/28/2022 | Cryptocurrency Exchange Services |
| 8 | FTX | 11/11/2022 | Cryptocurrency Exchange |
| 9 | Compute North | 9/22/2022 | Cryptocurrency Mining |
| 10 | Celsius Network | 7/13/2022 | Cryptocurrency Platform |
| 11 | Voyager Digital | 7/5/2022 | Cryptocurrency Brokerage |
| 12 | Three Arrows Capital | 7/1/2022 | Cryptocurrency Investment Firm |
1. Bittrex, Inc.
On May 8, 2023, Bittrex, a Seattle-based cryptocurrency exchange, filed for Chapter 11 reorganization in the U.S. Bankruptcy Court for the District of Delaware. Accompanying this were filings by three affiliate companies, namely Bittrex businesses located in Malta and Desolation Holdings LLC. Bittrex Global GmbH, another affiliate operating as a global exchange in Liechtenstein, did not file a petition.
These filings came in the wake of charges by the Securities and Exchange Commission (SEC) against both Bittrex and its co-founder and former CEO, William (Bill) Shihara, for securities violations. The SEC alleged that between 2017 and 2022, Bittrex failed to register with the agency while functioning as a brokerage, exchange, and clearing agency, generating at least $1.3 billion in revenue in the process. As a consequence of these charges, Bittrex ceased operations in April 2023.
The largest unsecured creditor listed by Bittrex in its filings was the U.S. Treasury’s Office of Foreign Assets Control, to whom it owed $24 million from a previous settlement over violations of sanctions by allowing customers from Iran, Cuba, and other similar nations to utilize its platform. On June 7, 2023, the court issued a final order giving approval to Bittrex’s debtor in possession (DIP) motion to obtain new financing.
2. Mirror Trading International
On February 9, 2023, Mirror Trading International, a South African cryptocurrency fund manager, filed for Chapter 15 liquidation in the U.S. Bankruptcy Court for the Southern District of Florida. Prior to this, the company had been dealing primarily in Bitcoin and had a foreign main proceeding ongoing in South Africa. A foreign main proceeding refers to a bankruptcy case in Mirror Trading’s primary business location, in this case, South Africa.
This bankruptcy filing followed a series of serious allegations. The Commodity Futures Trading Commission (CFTC), an independent agency of the U.S. government, had previously charged Mirror Trading with a $1.7 billion fraud on June 30, 2022. The accusations centered around a complex, global, multilevel marketing scheme, which the company reportedly ran from May 2018 to early 2021. All the Bitcoin invested was allegedly misappropriated, meaning it was improperly or illegally used for purposes other than what the investors were led to believe.
The CFTC further alleged that Mirror Trading’s CEO, Cornelius Johannes Steynberg, operated an unlicensed commodity pool scheme, accepting Bitcoin under the guise of a high-tech investment club. Investors were misled to believe that their investments would yield a 10% return each month.
Although a resident of South Africa, Steynberg was arrested in Brazil in January 2022 due to an Interpol warrant.
In their U.S. bankruptcy process, Mirror Trading had their ongoing South African case recognized to ensure a uniform approach, and to safeguard their assets. On March 20, 2023, the bankruptcy court approved this, meaning that their South African bankruptcy proceedings are now acknowledged in the U.S. too.
3. Genesis Global Holdco, LLC
On January 19, 2023, Genesis Global, a company providing lending, borrowing, spot trading, derivatives, and custody services for digital and fiat currency, filed for Chapter 11 reorganization in the U.S. Bankruptcy Court for the Southern District of New York. Genesis Global Holdco, LLC and two affiliates were involved in the filings. Genesis Global is organized under Delaware law and operates along with its non-debtor subsidiaries and affiliates, including Genesis Asia Pacific Pte. Ltd (GAP) based in Singapore.
Genesis Global’s bankruptcy was triggered by the collapse of LUNA, a cryptocurrency that powers the Terra ecosystem, and TerraUSD, a stablecoin pegged to the U.S. dollar that operates within the same ecosystem. The liquidation of Three Arrows Capital, a Singapore-based investment firm specialized in cryptocurrency trading, also contributed to a decline in investor confidence in the industry. This led to a situation akin to a “run on the bank,” where investors tried to withdraw their assets all at once.
At the time of filing, Genesis Global Capital (GGC) had an outstanding exposure in digital assets of approximately $175 million held at FTX, a cryptocurrency exchange, and $37 million in outstanding loans to Alameda Research, an FTX-related quantitative trading firm, in digital assets, with an estimated loss of $7 million from these loans. Both GGC and GAP had paused all lending and borrowing as of November 16, 2022.
After they declared bankruptcy, Genesis Global took a number of steps. First, they chose their Singapore branch (GAP) to represent them internationally. They also started a bidding process, to sell off some of their assets. They hired a mediator to help settle arguments about their recovery plan. Finally, they set up a method to figure out precisely how much money the cryptocurrency exchange FTX owed them.
4. Core Scientific Mining LLC
On December 21, 2022, Core Scientific, a publicly-traded cryptocurrency mining company based in Austin, Texas, filed for Chapter 11 reorganization in the U.S. Bankruptcy Court for the Southern District of Texas. Alongside Core Scientific Mining LLC, ten of its affiliates also submitted voluntary Chapter 11 petitions, listing liabilities of $1.19 billion in the bankruptcy proceedings.
Operating across North Dakota, North Carolina, Georgia, and Kentucky, Core Scientific primarily specializes in mining Bitcoin through data centers that leverage specialized computers to solve complex mathematical problems, a process that necessitates expensive equipment, technical expertise, and significant electricity consumption.
Core Scientific’s decision to file for bankruptcy was triggered by the declining price of Bitcoin, from an all-time high of over $69,000 in November 2021 to approximately $16,800 as of the bankruptcy filing date, coupled with increasing electricity costs. Furthermore, the proceedings surrounding the bankruptcy of Celsius Network, a cryptocurrency platform, also had a significant impact on Core Scientific’s financial position.
During the proceedings, the court permitted Core Scientific to obtain multiple debtor in possession (DIP) financings, initially amounting to $75 million and later an additional $70 million, as well as to sell Bitmain coupons – for the OEM who produced Core Scientific’s miners.
READ MORE: Core Scientific – Chapter 11 Bankruptcy Filing In-Depth
5. GK8 Ltd.
On December 7, 2022, GK8, a blockchain security company providing a platform for managing blockchain-based assets, filed for Chapter 11 reorganization in the U.S. Bankruptcy Court for the Southern District of New York. The case was jointly administered with the case of Celsius Network, an affiliate company that fully-owned GK8. There were two GK8 affiliates involved in the bankruptcy, both filing voluntary Chapter 11 petitions on the same date. Previously, in November 2021, Celsius Network, a cryptocurrency platform, had acquired GK8 for $115 million.
GK8’s self-custody vault system, which supports an array of cryptocurrencies and services such as DeFi (Decentralized Finance), tokenization, trading, custody, and staking, catered to financial institutions and cryptocurrency firms managing over $10 billion in assets collectively.
GK8’s bankruptcy filing was driven by the desire to execute a sale transaction that would maximize the value of the GK8 assets free from all claims and liabilities. Notably, GK8 did not carry any long-term or funded debt. Their liabilities were mainly trade and employee-related payables, intercompany obligations, and potential claims from account holders.
On December 2, 2022, Galaxy Digital, a digital asset and blockchain company, announced that it had won an auction to purchase GK8 for $44 million during the bankruptcy proceedings of Celsius Network. Shortly after this, the U.S. Bankruptcy Court for the Southern District of New York agreed to jointly administer both the GK8 and Celsius Network bankruptcy cases together due to their close affiliation.
Additionally, the bankruptcy court expressed concerns about an unusual provision in the agreement for the sale of GK8. This provision proposed transferring any potential legal actions to retrieve certain payments or transfers – known as “avoidance actions” – made to GK8 and its employees in the past year from Celsius Network to Galaxy Digital. The court indicated that this proposal needed more evidence to be justified, meaning the court required more information to approve this provision, likely to ensure fairness to all creditors and investigate whether any improper transactions were made prior to the bankruptcy.
6. Symbiont.io LLC
On December 1, 2022, Symbiont.io, a blockchain technology platform serving financial institutions and exchanges, filed for Chapter 11 reorganization in the U.S. Bankruptcy Court for the Southern District of New York.
Symbiont, established in 2013 by entrepreneur Mark Smith, offered solutions that enhanced transparency, lowered risk, and reduced costs for complex financial transactions. The company, primarily serving financial institutions and exchanges like Vanguard and Nasdaq, launched SmartLoans, the first smart contracts in the syndicated loan trading market. These smart contracts eliminated third-party intervention and offered blockchain-based solutions for recording corporate transactions.
On the date the bankruptcy petition was submitted, Symbiont held senior secured obligations and unsecured debt, each amounting to $2.3 million. Initially, they sought to dismiss their case on January 3, 2023, intending to refinance and possibly sell the business through a reorganization plan. However, they failed to secure any deals, lacked sufficient cash to continue operations, and could not propose a viable plan.
In early 2023, Symbiont’s secured creditor sought “stay relief” from the bankruptcy court, a measure attempting to stop any other actions from taking place during the bankruptcy proceedings. In response, Symbiont sought dismissal of the case, planning to proceed outside of Chapter 11 bankruptcy regulations.
During May and June 2023, the bankruptcy court sanctioned the proposed bidding procedures and approved the sale of substantially all of Symbiont’s assets.
7. BlockFi Inc.
On November 28, 2022, BlockFi, a company offering cryptocurrency exchange services and functioning as a crypto bank, filed for Chapter 11 reorganization in the U.S. Bankruptcy Court for the District of New Jersey. The company was founded in 2017 by Zac Prince and Flori Marquez. Alongside BlockFi Inc., eight affiliates also submitted voluntary Chapter 11 petitions.
BlockFi’s bankruptcy followed a significant liquidity crisis for the company, after FTX, a cryptocurrency exchange expected to acquire BlockFi, filed for Chapter 11 bankruptcy. This left loans that BlockFi made to Alameda Research, an FTX-related quantitative trading firm, and cryptocurrencies held on FTX’s platform intended for trading, trapped on FTX’s platform. Additionally, BlockFi lost around $80 million from its dealings with Three Arrows Capital, a Singapore-based investment firm specialized in cryptocurrency trading.
Preceding the bankruptcy filing, BlockFi experienced legal troubles in 2021 when several U.S. state regulators and the Securities and Exchange Commission (SEC) questioned whether its interest-bearing accounts were indeed securities requiring SEC registration. The dispute was settled in February 2022 with BlockFi agreeing to pay $100 million in penalties and discontinue offering such accounts to clients in the United States.
During the bankruptcy proceedings several significant legal actions occurred:
- U.S. Department of Justice (DOJ) seized assets related to the case, under an indictment against Sam Bankman-Fried, and claimed they were exempt from the bankruptcy proceedings
- BlockFi was authorized by the bankruptcy court to enter into restructuring and settlement agreements with Auros and Atlas Technology Group
- Unsecured creditors’ committee challenged the DOJ’s asset seizures, claiming it favored certain creditors over others
- Bankruptcy court appointed a mediator to facilitate negotiations
8. FTX Trading Ltd.
On November 11, 2022, FTX, a cryptocurrency exchange and hedge fund operator, filed for Chapter 11 reorganization in the U.S. Bankruptcy Court for the District of Delaware. The filing included FTX and 101 affiliated companies, after a severe liquidity crisis led to the failure of the company.
FTX, founded in 2019 by Sam Bankman-Fried (SBF), at its peak in July 2021, had over 1 million users and was the third-largest cryptocurrency exchange by volume. The company’s bankruptcy filings highlighted unprecedented failures in corporate controls and the absence of reliable financial information. The shortcomings included compromised system integrity, inadequate regulatory oversight, and concentrated control in the hands of an inexperienced and potentially compromised group.
FTX did not have an accounting department, and two audited financial statements were of concern. Forensic analysts were employed to identify assets on the blockchain, cybersecurity professionals to identify parties responsible for unauthorized transactions, and investigators to identify potential substantial transfers of FTX property prior to the bankruptcy petition filing.
FTX’s Bankruptcy Case Proceedings
The bankruptcy proceedings also involved FTX Digital Markets Ltd., an FTX subsidiary registered in the Bahamas. There was a request to move the case to the U.S. Bankruptcy Court in Delaware. Allegedly, the government of the Bahamas had obtained FTX’s digital assets through unauthorized access.
In response to demands for answers by FTX’s one million worldwide creditors, outside investors, and regulators, the U.S. Trustee asked the bankruptcy court to assign an examiner. An examiner in FTX’s bankruptcy case is an independent fiduciary that would investigate the financial affairs of the company, making sure everything is being done fairly and according to law.
On December 15, 2022, FTX requested court approval to sell property and for approval of bidding procedures, including a stalking horse bid. The aim was to sell multiple subsidiary companies.
Sam Bankman-Fried, the ultimate beneficial owner of FTX, faced challenges, including a denied motion for relief from the stay to permit insurers to advance funds. He was involved in litigation regarding seized stocks and cash by the federal government as part of criminal prosecution against him and other FTX-related individuals, namely Zixiao (Gary) Wang, Caroline Ellison, and Nishad Singh.
By June 8, 2023, the court had approved a key employee incentive plan, providing a potential pathway for the reorganization and recovery of the business.
9. Compute North Holdings, Inc.
On September 22, 2022, Compute North, a provider of data centers and infrastructure for blockchain, cryptocurrency mining, and computing, filed for Chapter 11 reorganization in the U.S. Bankruptcy Court for the Southern District of Texas. Alongside Compute North Holdings, Inc., 18 affiliates also filed Chapter 11 petitions, which had liabilities totaling $146.7 million at the time of filing.
Established in 2020 in Eden Prairie, Minnesota, Compute North operated across the United States, spanning three business segments: hosted cryptocurrency mining services, Bitcoin mining, and cryptocurrency equipment sales. The company, however, faced a liquidity crisis prompted by a combination of factors, including a collapse of cryptocurrency prices, escalating electricity rates, supply chain issues, and disputes with its primary lender Generate Capital. In particular, Bitcoin prices tumbled to almost 75% below their 2021 peaks, and electricity costs for Bitcoin mining doubled in 2022.
Over the following months, the bankruptcy court approved various orders, including the sale of specific assets and a corporate name change to Mining Project Wind Down Holdings, Inc. On February 16, 2023, Compute North’s joint plan of liquidation was approved, which included the authorization for the sale of de minimis assets to 7575 Management LLC, which was wholly-owned by Dave Perill, Compute North’s former CEO and a member of its board of directors, for up to $1 million without requiring further court approval.
READ MORE: Compute North – Chapter 11 Bankruptcy Filing In-Depth
10. Celsius Network LLC
On July 13, 2022, Celsius Network, a cryptocurrency platform, filed for Chapter 11 reorganization in the U.S. Bankruptcy Court for the Southern District of New York. Alongside Celsius Network LLC, 7 affiliates also filed Chapter 11 petitions.
Founded in 2017 by Alex Mashinsky, S. Daniel Leon, and Nuke Goldstein, Celsius Network was created as a platform that allowed users to take loans using crypto assets as collateral or to earn rewards. In return, users transferred all ownership rights of their assets to the company. By 2021, the value of cryptocurrency managed by the platform had grown to over $10 billion. Subsequently, in July 2022, Celsius reported $6 billion of assets and was preparing for an initial public offering (IPO).
However, in 2022, the collapse of Terra (LUNA), a blockchain protocol, and its TerraUSD stablecoin triggered an industry-wide sell-off, which along with negative publicity about Celsius, led to a mass withdrawal of cryptocurrency from the platform. This, in turn, caused a “run on the bank”, and the company had to pause all withdrawals, swaps, and transfers in June 2022. Subsequently, a complaint was filed against two of Celsius’ affiliates by KeyFi, Inc., alleging breach of contract, negligent misrepresentation, and fraud.
Celsius’ Bankruptcy Case Proceedings
At the time of its bankruptcy filing, Celsius and its affiliates had outstanding loans to borrowers totaling $503 million, collateralized by digital assets. Additionally, the company filed a motion to sell assets and for approval of bidding procedures, including a stalking horse, for equity interests in GK8 Ltd., a blockchain security company providing a platform for managing blockchain-based assets.
Investigations by an unsecured creditors’ committee and subsequent court proceedings revealed misconduct allegations against the company’s CEO, Alex Mashinsky, and other insiders, and a lack of transparency about their operations. Celsius faced accusations of running a Ponzi scheme, leading to a high level of mistrust among its customers. In August 2022, Celsius filed a separate asset recovery lawsuit – known as an adversary proceeding – against KeyFi, Inc. and its founder Jason Stone for allegedly stealing millions in coins from Celsius “wallets.”
A series of court orders and filings followed, including the appointment of an independent examiner by the bankruptcy court and forensic advisors to investigate the allegations and manage the fallout of the Celsius bankruptcy. During this period, CEO Alex Mashinsky resigned at the request of the unsecured creditors’ committee. The court also approved bidding procedures to sell substantially all of Celsius’ assets.
In January 2023, the examiner issued its final report, following an investigation into Celsius’ business affairs. This report highlighted that Celsius had misled its customers about its business operations, risk levels, and the potential for recovering their cryptocurrency assets in the case of a bankruptcy. Notably, the report found instances where Celsius used new customer deposits to fund customer withdrawal requests.
In March 2023, the bankruptcy court issued an opinion regarding which Celsius entities had liability for customer claims under the company’s terms of use. Celsius also filed a plan of reorganization.
11. Voyager Digital Holdings, Inc.
On July 5, 2022, Voyager Digital, a cryptocurrency brokerage company that provides custodial services and loans, filed for Chapter 11 reorganization in the U.S. Bankruptcy Court for the Southern District of New York. Accompanying Voyager Digital were two affiliates who also filed Chapter 11 petitions.
Founded in 2018 by Stephen (Steve) Ehrlich and a group of entrepreneurs, Voyager Digital was publicly-traded on the Toronto Stock Exchange in Canada. Instead of using individual digital wallets for customer deposits, the company used a platform that commingled cryptocurrency assets. It then swept these assets to a third-party custodial account to secure the company’s cryptocurrency deposits.
Voyager Digital had loan obligations totaling $1.1 billion at the time of filing, with debt owed by both Three Arrows Capital, a Singapore-based investment firm specialized in cryptocurrency trading, and Alameda Research, an FTX-related quantitative trading firm.
The decision to file for bankruptcy came amidst a “run on the bank” scenario precipitated by a downturn in the cryptocurrency industry. Incidents such as the collapse of Terra (LUNA), a blockchain protocol, and its TerraUSD stablecoin, as well as the collapse of Three Arrows Capital, amplified the onset of a ‘crypto winter’ that led to an industry-wide sell-off in June 2022.
Voyager Digital then reduced its daily withdrawal limit from $25,000 to $10,000 per user per day. As of April 30, 2022, the company valued its assets at $5 billion and liabilities at $4.9 billion.
Voyager Digital’s Bankruptcy Case Proceedings
Several legal proceedings followed the bankruptcy filing, including Voyager Digital seeking to act as a foreign representative in Canada, and the U.S. Trustee appointing an unsecured creditors’ committee.
Voyager Digital also presented a plan proposing that account holders receive a mix of coins, new common shares in the reorganized company, existing VGX tokens – the native cryptocurrency of the Voyager platform, and any recovery from the Three Arrows Capital loan.
On September 26, 2022, after an auction, the company selected West Realm Shires Inc., the parent company of the FTX.US cryptocurrency exchange, as the successful bidder. Subsequently, Voyager Digital sought authority to enter into an asset purchase agreement with FTX.US for $1.4 billion, which was approved by the court on October 20, 2022. However, this deal ultimately fell through as FTX itself filed for Chapter 11 reorganization.
A subsequent deal, similar in nature but valued lower at $1 billion, was attempted with Binance.US to acquire Voyager Digital. However, this deal also fell through in April 2023. Separately, the bankruptcy court confirmed Voyager Digital’s reorganization plan on March 10, 2023.
12. Three Arrows Capital Ltd.
On July 1, 2022, Three Arrows Capital, an investment firm specialized in cryptocurrency and digital asset trading, filed for Chapter 15 liquidation in the U.S. Bankruptcy Court for the Southern District of New York. Incorporated in the British Virgin Islands, Three Arrows Capital had over $3 billion of assets under management (AUM) as of April 2022. However, after defaulting on a $654 million loan to Voyager Digital, the firm succumbed to the intense volatility of the cryptocurrency markets and initiated a liquidation proceeding in the British Virgin Islands.
The Eastern Caribbean Supreme Court appointed Russell Crumpler and Christopher Farmer as co-liquidators, but they reported a lack of cooperation from Three Arrows Capital’s founders, Kyle Davies and Su Zhu.
Three Arrows Capital, with its parent company in Singapore, was given approval to have its U.S. assets managed by foreign representatives in the British Virgin Islands. This step aimed to freeze any transfers or disposals of the company’s assets, while also seeking to issue subpoenas to its founders, who the liquidators believed might dispose of the assets, making recovery difficult. A cross-border court-to-court communications protocol was later proposed by the British Virgin Islands court and approved by the U.S. bankruptcy court on December 6, 2022.
