Some of the biggest losers of all, these billionaires lost over 75% of their wealth in just just just 12 months. Why it could get even worse as U.S. 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. U.S. 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 U.S. regulatory crackdown, led by SEC Commissioner Gary Gensler and U.S. 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 U.S. 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 U.S. 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 U.S.-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. U.S. 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.
Here is how crypto’s richest investors have fared over the last twelve months. Net worths were measured on March 10, 2023 and March 11, 2022.
#1. Changpeng Zhao
Net worth: $10.5 billion (down from $65 billion)
Source of wealth: Binance
#2. Jed McCaleb
Net worth: $2.4 billion (down from $2.5 billion)
Source of wealth: XRP
3. Brian Armstrong (tie)
Net worth: $2.2 billion (down from $6.6 billion)
Source of wealth: Coinbase
3. Chris Larsen (tie)
Net worth: $2.2 billion (down from $4.3 billion)
Source of wealth: Ripple
5. Nikil Viswanathan and Joseph Lau
Net worth: $1.8 billion each (down from $2.4 billion each)
Source of wealth: Alchemy cofounders
7. Cameron and Tyler Winklevoss
Net worth: $1.2 billion each (down from $4 billion each)
Source of wealth: Bitcoin
9. Matthew Roszak
Net worth: $1.1 billion (down from $1.4 billion)
Source of wealth: Bitcoin, Ether
10. Song Chi-hyung
Net worth: $950 million (down from $3.7 billion)
Source of wealth: Upbit
11. Fred Ehrsam
Net worth: $930 million (down from $2.1 billion)
Source of wealth: Coinbase
12. Michael Saylor
Net worth: $760 million (down from $1.6 billion)
Source of wealth: Bitcoin, Microstrategy Solutions
13. Tim Draper
Net worth: $650 million (down from $1.2 billion)
Source of wealth: Bitcoin
14. Devin Finzer and Alex Atallah
Net worth: $600 million (down from $2.2 billion)
Source of wealth: OpenSea cofounders
16. Kim Hyoung-nyon
Net worth: $500 million (down from $1.9 billion)
Source of wealth: Upbit
17. Barry Silbert
Net worth: $320 million (down from $3.2 billion)
Source of wealth: Bitcoin, Digital Currency Group
18. Sam Bankman-Fried
Net worth: Estimated at less than $10 million (down from $24 billion)
Former source of wealth: FTX
19. Gary Wang
Net worth: Estimated at less than $10 million (down from $5.9 billion)
Former source of wealth: FTX
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Now, let's delve into the information provided in the article:
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Overview of the Situation:
- The article discusses the significant financial losses experienced by cryptocurrency billionaires over the past 12 months.
- Cryptocurrency billionaires collectively lost $110 billion in the last year, with Forbes reporting on these losses in its 2023 World’s Billionaires List.
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Market Conditions:
- In the 12 months leading up to March 2023, the cryptocurrency market experienced a substantial downturn, shedding around $700 billion in market value, falling to $1 trillion, according to CoinMarketCap.
- The decline in valuations for private crypto startups is attributed to rising interest rates and investors withdrawing money from the tech sector.
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Individual Cases:
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Sam Bankman-Fried:
- Experienced the biggest crash among cryptocurrency billionaires.
- Founder of FTX exchange, which filed for Chapter 11 bankruptcy protection.
- Faces multiple charges of fraud and financial wrongdoings, with a trial set to begin in October.
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Changpeng Zhao (CZ):
- Founder and CEO of Binance, still the industry’s richest person.
- Forbes now estimates his fortune at $10.5 billion, down from $65 billion a year ago.
- Facing legal challenges, including a lawsuit by the U.S. Commodities and Futures Trading Commission and potential criminal charges of money laundering and tax evasion.
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Brian Armstrong:
- CEO and co-founder of Coinbase, saw his net worth decrease from $6.6 billion to $2.2 billion.
- Coinbase faced a $50 million fine for alleged failure to prevent money laundering, and the SEC is preparing an enforcement action against the company.
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Winklevoss Twins (Cameron and Tyler):
- Each worth $1.2 billion, down from $4 billion, due to issues at their exchange Gemini.
- Gemini faced legal troubles, including a lawsuit by the Commodities and Futures Exchange Commission and problems with Gemini Earn, leading to frozen funds.
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Barry Silbert:
- Founder of Digital Currency Group (DCG), formerly worth $3.2 billion, now estimated at $400 million.
- Involved in a criminal probe related to transactions between DCG companies.
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Other Notable Figures:
- The article provides a list of other cryptocurrency billionaires, including their current net worth and sources of wealth, highlighting the extent of their losses over the past year.
In summary, the article paints a picture of a challenging year for cryptocurrency billionaires, marked by legal challenges, regulatory crackdowns, and significant financial losses across the industry.
