Crypto Crisis: A Timeline of Key Events

Updated Feb. 23, 2023 11:55 am ET

The crisis roiling the crypto industry captured public attention with the collapse of FTX this past November and the arrest soon after of the exchange’s founder,

Sam Bankman-Fried.

The industry’s troubles began months before—and has continued to spread since. Below is a look at the key dates in the crisis.

2022

Feb. 13: FTX and other crypto companies run their first Super Bowl ads as they push to draw more investors and boost awareness of the industry. Bitcoin is trading back down at $42,259.28 as the market starts to price in the Federal Reserve’s coming rate increases. The previous November, it had peaked at $67,802 as investors rushed into riskier assets.
May 4: The Fed raises its benchmark rate by a half-percentage point to tame soaring inflation, marking the sharpest increase since 2000. The central bank’s interest-rate increases over coming months will spark a selloff in speculative investments, including bitcoin. Bitcoin is trading at $39,780.
May 9: The cryptocurrency TerraUSD, a stablecoin that is supposed to keep its value at $1, falls below its fixed value, triggering a selloff. Along with its sister coin, Luna, TerraUSD loses $40 billion in value. Bitcoin is trading at $31,075 late in the day, down 10% from the previous day.
June 12: The crypto lender Celsius tells users it is freezing all account withdrawals, citing extreme market conditions.
June 17: Babel Finance, a crypto lender based in Hong Kong, tells customers it is suspending withdrawals, citing “unusual liquidity pressures.”
June 27: The hedge fund Three Arrows Capital, which had invested heavily in TerraUSD, defaults on loan payments to the crypto lender Voyager. Three Arrows was heavily leveraged with billions of dollars of loans that it defaulted on. Its other crypto lenders included Genesis and BlockFi.
June 29: A British Virgin Islands court orders Three Arrows Capital to liquidate after creditors sue the crypto hedge fund on alleged failure to repay debts.
July 5: Voyager files for bankruptcy protection, saying it faced a run on the bank.
Nov. 2: CoinDesk publishes an article saying a big chunk of Alameda Research’s assets consists of a token created by FTX, which the firm might have overvalued, setting off a run on FTX.
Nov. 8: FTX agrees to be taken over by its rival Binance after succumbing to a sudden liquidity crunch, with users pulling money and cryptocurrency out of their accounts.
Nov. 9: Binance walks away from a deal to rescue FTX, saying the issues it found at Sam Bankman-Fried’s firm were beyond its control.
Nov. 10: The Wall Street Journal reports that FTX lent billions of dollars of customer assets to fund bets by Alameda Research.
Nov. 11: FTX files for chapter 11 bankruptcy protection.
Nov. 28: The crypto lender BlockFi follows FTX into bankruptcy.
Dec. 12: FTX’s Sam Bankman-Fried is arrested in the Bahamas after federal prosecutors in New York file criminal charges, and he is later transferred to U.S. custody.
Dec. 22: Sam Bankman-Fried is released on $250 million bond and ordered to stay in his parents’ Palo Alto, Calif., home.

SHARE YOUR THOUGHTS

What is your outlook for the crypto industry? Join the conversation below.

2023

Jan. 12: The Securities and Exchange Commission sues the crypto firms Genesis and Gemini over a lending product that allegedly violated investor-protection laws.
Jan. 18: The crypto-focused media group CoinDesk hires investment bankers to help it explore options, including a sale.
Jan. 19: The crypto lender Genesis files for chapter 11 bankruptcy protection. FTX’s new chief executive says he is looking into the possibility of reviving the bankrupt exchange as he works to return money to customers and creditors.
Feb. 15: The Securities and Exchange Commission proposes a rule that could make it harder for many asset managers to invest customers’ money in cryptocurrencies.
Feb. 16: The SEC charges Do Kwon, the founder of TerraUSD and Luna, with misleading U.S. investors who purchased billions of dollars’ worth of the failed cryptocurrencies. Mr. Kwon’s whereabouts aren’t known, according to the suit. He has been the subject of a global manhunt.
Feb. 23: Federal prosecutors unveil a new indictment against Sam Bankman-Fried, charging him with additional criminal counts and detailing allegations that he engaged in conduct that led to FTX’s collapse.

This explanatory article might be periodically updated.

Crypto imploded in 2022, as investors lost faith in digital assets and the industry was plagued with crisis. Unlike other collapses, this one has largely avoided rippling into other markets. WSJ explains how crypto became so interconnected. Illustration: Mallory Brangan

Write to Candice Choi at candice.choi@wsj.com

Source link