Crypto Winter Gets Icier Just Days Into New Year


Less than a week after the New Year, the cryptocurrency winter It’s getting icier as job cuts mount, regulators turn up the heat and businesses warn of losses, and there’s little sign the tumult will abate any time soon.

key takeaways

  • A series of negative crypto news defined the beginning of 2023.
  • Former FTX CEO Sam Bankman-Fried has filed an application to keep his 56 million shares of consumer trading app Robinhood, valued at about $450 million, to pay his legal fees.
  • In the first week of 2023, crypto lender Genesis cut 30% of its staff, crypto-focused bank Silvergate Capital Corp. laid off 40%, and crypto exchange Huobi laid off 20% of its employees.
  • Regulators have intensified warnings to banks to be aware of the risks associated with cryptocurrencies.

Genesis, Silvergate, China Huobi ax workers

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

Silvergate Capital Corp., a California bank focused on cryptocurrency, laid off 40% of its employees after investors rushed to redeem $8.1 billion in the bank in the wake of the FTX collapse. Silvergate had warehouses for FTX units and Alameda Research, the trading firm behind FTX. Meanwhile, Chinese crypto exchange Huobi said it plans to lay off about 20% of its staff. “With the current state of the bear marketa very thin team will remain in the future,” Huobi said in a statement.

Due to the collapse of FTX at the end of 2022, Coinbase cut 18% of its staffKraken lost almost a third of its employees and laid off 5% of its staff.

Courtroom drama and cryptography

In New York, coin base Global Inc., a crypto exchangeagreed pay $100 million to resolve New York State’s claims that it failed to comply with anti-money laundering regulations. and a US court ruled that the crypto company is now bankrupt Celsius You can keep all of your clients’ crypto deposits, which means that clients cannot get their funds back from the defunct exchange. The ruling reinforces a basic rule for crypto investors: “not your keys, not your crypto,” which essentially means that investors can’t be sure their assets are protected unless they hold them in a crypto wallet they own and control.

SBF tries to hold on to a $450 million stake in Robinhood

The interruption comes mainly from the saga of FTXwhose former CEO, Sam Bankman-fried He has pleaded not guilty to fraud charges following the implosion of his company in November. The disgraced tycoon said in a filing this week that he wants to keep control of his 56 million shares of the consumer trading app. Robin Hoodvalued at approximately $450 million, to help pay for his legal defense. In a December 22 bankruptcy filing, FTX argued that because there are so many creditors seeking ownership of the shares, “the assets should be frozen until this court can resolve the issues fairly for all of the debtors’ creditors.” “.

Regulators Warn Banks About Crypto Risks

Watching in the dark are federal regulators, who until recently have been reluctant to get into the cryptocurrency mess. The Federal Reserve, the Federal Deposit Insurance Corporation (FDIC), and the Office of the Comptroller of the Currency banks warned in a joint statement this week to be aware of the risks associated with cryptocurrency assets, including legal uncertainties and misleading disclosures.

The bottom line

In this context, cryptocurrency prices are not going anywhere in a hurry. The value of most major cryptocurrencies is low or flat compared to the past week, with Bitcoin trading around $16,850 as of noon Friday New York time, 75% lower than its all-time high reached in November 2021.