Bitcoin, crypto billionaires lose $110 billion in 2022

Some of the biggest losers of all, these billionaires lost over 75 per cent of their wealth in just 12 months. Why it could get even worse as US regulators and prosecutors take aim.

It’s been a tough year to be a cryptocurrency billionaire. Fraud allegations, government lawsuits and investigations, internecine squabbling and slumping asset valuations combined to bruise a fragile industry. Its billionaire promoters have lost a combined $110 billion in the last year, according to Forbes’ 2023 World’s Billionaires List, an annual compilation of ten-figure fortunes.

Last year Forbes identified 19 crypto billionaires, the most ever, who were worth a collective $140 billion. Now, those same individuals are worth less than $30 billion, as of March 10, 2023, the date Forbes measured net worths for its list. Ten of them are no longer billionaires.

The biggest crash of the year was that of Sam Bankman-Fried. Twelve months ago, the crypto mogul’s FTX exchange was fresh off a $400 million fundraising that valued it at $32 billion, giving Bankman-Fried a $24 billion net worth and making him one of the 50th wealthiest people in the world, per Forbes estimates.

Since then, FTX has filed for Chapter 11 bankruptcy protection and Bankman-Fried is worth next to nothing. US attorneys have charged him with multiple counts of fraud and other financial wrongdoings. (He has pleaded not guilty to all counts). Bankman-Fried’s former colleagues, Caroline Ellison and fellow ex-billionaire Gary Wang, have turned state's witnesses. His trial is set to begin in October, and he faces up to life in prison.

In the 12 months leading up to March 2023 cryptocurrencies shed around $700 billion in market value–falling to $1 trillion–according to CoinMarketCap. On top of that, valuations for private crypto startups slumped due to rising interest rates and investors pulling money from tech. Crypto market contagion, which began last summer with the blowup of hedge fund Three Arrows Capital and culminated in FTX’s implosion in November, sparked a sprawling US regulatory crackdown, led by SEC Commissioner Gary Gensler and US prosecutors, that has spooked investors and left no crypto billionaire unscathed.

Changpeng Zhao, founder and CEO of crypto exchange Binance, is still the industry’s richest person, though Forbes now pegs his fortune at $10.5 billion, down from $65 billion a year ago. Last month, the US. Commodities and Futures Trading Commission sued Zhao and Binance for allegedly circumventing US compliance controls. (CZ and Binance dismissed the charges as inaccurate.) Meanwhile prosecutors at the Department of Justice, working with IRS officials, are weighing a criminal indictment of Zhao and Binance for money laundering and tax evasion charges, Reuters reported earlier this year. Additionally, the Securities and Exchange Commission is carrying out its own investigation of Binance, the Wall Street Journal reported last year. The SEC is also preparing to sanction crypto firm Paxos for its role in issuing Binance’s BUSD stablecoin, a medium of exchange used by traders on Binance, according to the Wall Street Journal. CZ and Binance have not been charged by the DOJ or SEC, and Binance has denied the reported allegations.

Brian Armstrong, CEO and cofounder of US crypto exchange Coinbase, is worth $2.2 billion–down from $6.6 billion last year, as a result of a slide in shares of his publicly traded company. In January, Coinbase paid a $50 million fine to the state of New York to settle allegations that Coinbase had failed to prevent money laundering on its exchange. Last month, Coinbase revealed that the Securities and Exchange Commission is preparing an enforcement action against it. Coinbase insists it is “confident in the legality of its assets and services.” However, amid the clampdown, the US-based company is reportedly looking at launching an overseas trading venue.

Cameron and Tyler Winklevoss, the twins of The Social Network fame, are each worth $1.2 billion, down from $4 billion apiece last year, due to mounting problems at their privately held exchange Gemini. Last July, the Commodities and Futures Exchange Commission sued Gemini for “making material false or misleading statements” when applying for approval of a bitcoin futures product. (Cameron Winklevoss dismissed the charges as “nonsense.”). Then, in January, the SEC sued Gemini after its interest-bearing product, Gemini Earn, blew up, leaving 340,000 investors–most of them retail–with $900 million of frozen funds.

In response to the allegations, the Winklevii pinned the blame for the Earn situation on another crypto tycoon, Barry Silbert, founder of crypto holding company Digital Currency Group. DCG’s lending business, Genesis Global Capital–which was also sued by the SEC–had been responsible for lending out Earn users’ crypto. In an open letter, Cameron Winklevoss accused Silbert and DCG employees of accounting fraud, alleging they “conspired to make false statements and misrepresentations to Gemini, Earn users, other lenders and the public at large about the solvency and financial health of Genesis.” Silbert and DCG denied those claims. US prosecutors in New York’s Eastern District Court opened a criminal probe in January of transactions between DCG companies, Bloomberg reported at the time. A spokesperson for DCG says the firm has “no knowledge of or reason to believe that there is any Eastern District of New York investigation.” A call from Forbes to EDNY’s press office went unreturned.

Silbert, formerly worth $3.2 billion, now is worth an estimated $400 million, thanks to a stash of bitcoins he’s said he bought in 2011. Genesis filed for Chapter 11 bankruptcy in January. It owes its largest 20 creditors about $3.5 billion, though on February 10, Gemini and other large creditors reached an initial agreement for a partial recovery of funds.