Centralized Cryptocurrency Exchange Losses
Companies Misrepresented Their Financial Strengths While Downplaying Their Portfolio Risks
Several centralized cryptocurrency exchanges used to buy, sell and trade digital currencies (i.e., Bitcoin, Etherium, etc.) have recently collapsed. The most publicized involves allegations of fraud, criminal conspiracy, and embezzlement relating to the exchange “FTX,” which lost an estimated 6 billion dollars. Another less egregious example involves the exchange “Gemini” and its product “Gemini Earn,” which overnight lost nearly one billion dollars in digital assets. The most recent exchange to file bankruptcy is Bittrex in May of 2023 with holdings equal to approximately one billion dollars.
What Are Centralized Cryptocurrency Exchanges?
Centralized cryptocurrency exchanges function as a go-between for buyers and sellers of digital assets, earning revenue via transaction fees and commissions. Similar to a stock exchange, but as opposed to trading for USD, the user trades for digital assets.
In the best-case scenario, these exchanges provided inaccurate representations of their financial stability and minimized the risks involved in their investment portfolios. In the worst case, these exchanges were advanced Ponzi schemes that fraudulently extracted billions of dollars from their clients. Consequently, both significant institutional investors and smaller retail investors have suffered losses amounting to tens of billions of dollars.
FTX Collapse Puts Centralized Crypto Exchanges Under Scrutiny
These centralized crypto exchanges have come under fire lately following the collapse of one of the largest exchanges, FTX.
FTX has been accused of misappropriating customers’ assets and employing them for illicit activities. Sam Bankman Fried, the founder of FTX, has been arrested and indicted on eight charges of wire fraud, conspiracy, and securities fraud. Investors who entrusted their funds to FTX’s exchanges have incurred losses in the billions of dollars. As a result of FTX’s collapse, issues with other exchanges have become more visible.
Other crypto exchanges to have collapsed in the recent past include the Celsius Network, Voyager Digital, Three Arrows Capital, BlockFi, and, most recently, Bittrex.
There Is Still Hope for the Victims of Exchange Collapses
Our firm will aggressively pursue claims on behalf of victims of the collapsed exchanges and/or fraud and theft to recover some or all of our clients’ digital currencies. We will pursue claims in bankruptcy where that is a viable path to recovery. We will also evaluate each loss to determine whether there are additional entities, such as those who marketed or promoted an exchange, who may be legally responsible for the loss.
If you’ve lost money in a cryptocurrency exchange collapse, please call us today for a free and confidential consultation.