Cryptocurrency prices showed signs of life as investors sifted through the remains of bankruptcies and scandals in the sector.
Bitcoin (~BTCUSD) it was down 1% to $18,120.31 on Jan. 12, according to data firm CoinGecko, but is up 7.2% on the week.
Ether, the native currency of the ethereum blockchain, fell 1.2% to $1,383.85 but rose 10% on the week, while dogecoin fell 1.8% to $0.077114 and rose 5.3% in the past seven days.
“Bullish sentiment seems to be in full swing again this week,” said James Edwards, crypto expert at Finder. “This week saw the biggest price rally since the FTX crash, possibly led by a dog-themed coin called Bonk.”
Crypto investors have suffered in the wake of the FTX collapse and other major failures, including the Celsius Network, which declared bankruptcy in July.
David Lesperance, managing partner of immigration and tax consultancy Lesperance & Associates, said crypto investors in bankrupt companies like Celsius have recently received bad news.
Judge Martin Glenn, the chief US bankruptcy judge for the Southern District of New York, ruled that Celsius, not the investors, owned the assets in their accounts.
Crypto bankruptcies costing investors privacy
Celsius had about 600,000 accounts in its Earn program, and the accounts had a combined value of approximately $4.2 billion as of July 10, 2022, according to Glenn’s ruling.
New York State Attorney Letitia James filed a lawsuit on January 5 against Celsius Network co-founder and CEO Alex Mashinsky, accusing him of “repeatedly making false and misleading statements about the security of Celsius to induce investors to deposit billions of dollars in digital assets on the platform.” “
Winston Ma, an adjunct professor at New York University School of Law, said the FTX case has created a new unintended consequence: Cryptocurrency bankruptcies reduce investor anonymity.
“Anonymity is widely regarded as one of the holy grails of Web3, but the collapse of several cryptocurrency platforms that began last year is testing the industry’s promise of user privacy,” said Ma, author of Blockchain and Web3: Building the Cryptocurrency, Privacy, and Security Foundations of the Metaverse.
Ma said hundreds of thousands of Celsius customers lost their anonymity due to the Chapter 11 filing after a court ruling in September forced them to reveal the names of account holders and coin balances.
Using filings from a Delaware bankruptcy court, CNBC has assembled a wider pool of celebrity investors and high-profile financiers than previously reported, including Alibaba co-founder Joe Tsai, New England Patriots owner Robert Kraft and billionaire hedge fund manager Paul Tudor Jones, among others.
Ma said the public feud among stakeholders in cryptocurrency bankruptcies is revealing more details. In the past, only less sophisticated creditors—small savers—were the most public.
Dutch crypto investor owes $297 million to Genesis
“They’re talking to reporters, logging into Zoom hearings with a video of themselves, or interrupting a court break to play music,” he said. “Their names are being made public, while many other domestic and global creditors remain anonymous.”
In the new year, however, even the biggest players are speaking out on Twitter and other public channels, Ma said. He quoted Cameron Winklevoss, co-founder of cryptocurrency exchange Gemini, accusing billionaire Barry Silbert, CEO of Digital Currency Group, of accounting fraud.
Finder’s Edwards said FTX is old news and DCG is “the new multi-billion dollar elephant in the room.”
“The macro outlook for crypto markets depends entirely on how the company manages its leveraged subsidiaries, including lender Genesis, which owes $1.1 billion to crypto exchange Gemini,” he said.
“Gemini Earn used Genesis to generate up to 8% returns on crypto for its users, and on Tuesday, Gemini officially called off its loan to Genesis in hopes of forcing a debt repayment.”
The catch, Edwards added, “is that it’s an open secret that Genesis will struggle to make payments on time, given current market conditions and the fragility of the crypto banking landscape.
“Gemini is also feeling the heat, with a class action lawsuit filed by its own users over the Earn program,” he said.
In response, Edwards said, Winklevoss has been publishing open letters and tweets directed at Silbert, urging the board to fire him and blaming him for the mismanagement of Genesis and, ultimately, the woes of Gemini users.
“Dutch exchange Bitvao is also out for blood, owing $297 million to Genesis,” he said. “It says the recovery plan proposed by DCG is unacceptable and accuses it of being fully solvent and able to repay Genesis’ creditors.”