Top Cryptocurrency Bankruptcies of 2023

Discover the rundown of crypto bankruptcies in 2023, with detailed insights into the downfall of major exchanges.
It is evident that the crypto industry had a disastrous year in 2022. The simultaneous collapse of Terraform Labs and FTX sparked one of the harshest crypto winters in recent memory, leading to bankruptcies, layoffs, and closures across the market.
In 2023, the aftermath of the previous year’s events continued to unfold, as bankruptcy proceedings for market leaders like Celsius, Voyager, Three Arrows Capital, BlockFi, and FTX progressed. However, there were still notable bankruptcies and exchange failures that made headlines.
Let’s dive into the list of crypto bankruptcies and failures in 2023.
Notable Crypto Bankruptcies
Genesis
The cryptocurrency sector began 2023 on a somber note with the bankruptcy declaration of Genesis, a prominent crypto lending subsidiary of Digital Currency Group. The company’s troubles started in mid-2022 after suffering a significant loan loss to an undisclosed counterparty, later revealed to be Three Arrows Capital, which also filed for bankruptcy in July 2022.
Genesis’s vulnerabilities were further exposed by the collapse of FTX and Alameda Research in November 2022. This had a domino effect on Genesis, which had $175 million in assets locked on FTX and a lending relationship with Alameda. The impact was immediate and severe, forcing Genesis to suspend redemptions at its lending unit due to severe financial distress. Consequently, the company filed for Chapter 11 bankruptcy in January 2023 and presented an 83-page bankruptcy plan.
Core Scientific
Core Scientific, a leading publicly traded crypto mining company in the United States, filed for Chapter 11 bankruptcy in December 2022, just before the arrival of 2023. The company cited declining Bitcoin prices, rising energy costs, and a $7 million unpaid debt from Celsius Network as the primary reasons for its financial woes.
Despite the challenges, Core Scientific managed to find a glimmer of hope. In late December 2023, the company reached an in-principle agreement with shareholders. This agreement involved the distribution of convertible notes and stock, with plans to potentially relist on the NASDAQ exchange by mid-January 2024. This strategic move indicated an attempt to navigate the financial difficulties and signaled a potential path to recovery.
Babel Finance
While not filing for bankruptcy, Hong Kong-based crypto lender Babel Finance faced turbulent times and sought extended creditor protection in Q2 2023. The company encountered significant challenges following the sudden suspension of client withdrawals in April. These difficulties were compounded by substantial losses incurred through proprietary trading with customer funds.
According to its restructuring proposal deck, Babel Finance suffered losses of over $280 million in Bitcoin and Ether. These losses, amounting to around 8,000 BTC and 56,000 ETH, resulted from liquidation events triggered by a significant market downturn in June.
Crypto Exchange Bankruptcies (2023)
Crypto exchanges faced intense regulatory scrutiny in 2023, particularly in key regions like the U.S. and UK. KuCoin announced its exit from the New York market due to regulatory challenges. Meanwhile, Binance reached a historic settlement with the DOJ over criminal charges and stopped onboarding new users in the UK. However, the following platforms experienced notable shutdowns.
Bittrex Global
Bittrex Global, a reputable crypto exchange, announced the cessation of its operations a few months after its U.S. arm shut down. This decision, revealed in early December, marked a significant retreat by a major player in the market.
Bittrex Global, regulated in Lichtenstein and Bermuda, urged its customers to complete necessary transactions by early December, after which only withdrawals would be available. The specific reasons for this decision were undisclosed, leaving room for speculation.
Txbit
Netherlands-based cryptocurrency exchange Txbit also announced its shutdown in 2023. The firm attributed its closure to uncertain regulatory conditions and adverse market shifts, which rendered its business model unprofitable.
In a detailed announcement, Txbit mentioned rising compliance costs and constant pressure on product margins as key factors behind the decision to cease operations.
Bitfront
Bitfront, a U.S.-based crypto exchange backed by Line Corp, a Japanese social media giant, announced its decision to cease operations early in 2023. This announcement came despite the exchange’s efforts to navigate the challenges in the rapidly evolving crypto industry. Bitfront suspended new sign-ups and credit card payments as a precursor to its complete shutdown.
In its statement, Bitfront cited the need to focus on growing the LINE blockchain ecosystem and LINK token economy as the primary reason for the decision. This strategic shift reflects the broader trend within the crypto industry, where companies increasingly focus on core strengths and long-term viability in response to market and regulatory pressures.
Major Crypto Layoffs in 2023
Blockchain.com: Significant Workforce Reduction
Blockchain.com, a well-known crypto brokerage, underwent significant downsizing in 2023, reflecting the industry-wide trend of layoffs. The company announced a 28% reduction in its workforce, amounting to approximately 110 employees. This decision followed a previous round of layoffs in the summer, where an additional 150 staff members were let go, and the closure of its Argentina offices.
These layoffs at Blockchain.com were a response to the market downturn and the need to streamline operations in a challenging financial environment. However, in December 2023, the company announced plans to increase its workforce by 25% as part of its expansion into Nigeria and Turkey.
Coinbase: Navigating a Restructuring Phase
Coinbase, the largest U.S. crypto exchange, underwent a significant restructuring in 2023, which included laying off around 20% of its staff, totaling approximately 950 employees. This decision was part of a larger cost-cutting strategy implemented by the exchange. By the end of September, the company had around 4,700 employees, highlighting the scale of its downsizing efforts.
Coinbase faced challenges in turning a profit amidst decreased investor trading activity, which was a primary driver behind the layoffs. Additionally, the exchange agreed to pay a $50 million penalty to New York State’s Department of Financial Services to settle accusations of insufficient background checks on customer accounts.
Crypto.com: Series of Workforce Reductions
Crypto.com, one of the leading exchanges, experienced significant layoffs in 2023, cutting a fifth of its global workforce. This was the second round of layoffs for the exchange within six months. Reports indicated that some staff members discovered their layoff when disconnected from online meetings or removed from company systems.
The layoffs at Crypto.com were partly attributed to the aftermath of the FTX collapse in November, which triggered heavy withdrawals across several crypto exchanges. Additionally, a misstep involving a roughly $400 million transaction further complicated matters for the exchange.
Digital Currency Group: Downsizing and Strategic Shifts
The Digital Currency Group (DCG), a prominent crypto conglomerate, announced the closure of its wealth-management division, HQ. This move was part of a strategic shift within DCG, which also included properties like Genesis Global Capital, Grayscale, and the crypto-focused media company CoinDesk.
The decision to shut down HQ came amidst a broader reassessment of DCG’s holdings. The company also explored options for CoinDesk, including a potential sale, following multiple unsolicited offers exceeding $200 million. These developments at DCG reflect the shifting priorities within the crypto industry as companies seek to adapt to an evolving market and regulatory landscape.
FAQ
What happens when a crypto exchange goes bankrupt?
When a crypto exchange goes bankrupt, customer assets may be at risk, and users could face difficulties in withdrawing their funds, depending on the exchange’s insolvency proceedings and asset protection measures.
Which crypto exchanges collapsed in 2023?
In 2023, notable crypto exchanges that collapsed include Bittrex Global, Txbit, and Bitfront.
Which crypto companies went bankrupt?
In 2023, Genesis, Core Scientific, and Babel Finance (although not officially bankrupt, it faced significant financial distress) were among the major crypto entities that went bankrupt.
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