The bear market and the wave of bankruptcies in the crypto industry drained $116 billion from the pockets of founders and investors in the past nine months, according to recent estimates by Forbes.
The loss represents the combined personal equity of 17 people in the space, with over 15 losing more than half of their fortunes since March. As a result, 10 names were removed from the crypto billionaires list.
One of the major losses was attributed to Binance CEO Changpeng “CZ” Zhao. In March, his 70% stake in the crypto exchange was valued at $65 billion, but it is now worth $4.5 billion.
Coinbase CEO Brian Armstrong has a net worth estimated at $1.5 billion, down from $6 billion in March. The fortune of Ripple’s co-founder Chris Larsen was reduced from $4.3 billion to $2.1 billion, while Cameron and Tyler Winklevoss of Gemini were valued at $4 billion in March but are worth $1.1 billion each now.
Among those who lost the billionaire status are FTX co-founders Sam Bankman-Fried and Gary Wang, whose fortunes in March were valued at $24 billion and $5.9 billion, respectively, and at $0 in December. The $3.2 billion fortune of Barry Silbert, founder and CEO of Digital Currency Group, was also lost as a result of the contagious wave caused by the collapse of FTX, according to Forbes.
Among the former billionaires are also Nickel Viswanathan and Joseph Lay from crypto software firm Alchemy, Devin Finzer and Alex Atallah of OpenSea, Fred Ehrsam of Coinbase, MicroStrategy founder Michael Saylor and venture capitalist Tim Draper.
The bear market to cryptocurrencies is unlikely to end soon, as the FTX crisis has deterred investor confidence and created a liquidity crisis across the industry, Cointelegraph reported. As a result, the market decline is expected to last until the end of 2023.
Sam Bankman-Fried has reportedly been leading a decent lifestyle while under house arrest in his parent’s home in Palo Alto — with daily jogs, a security detail, and a couple of in-home visits.
However, it's not exactly a life of endless luxury either. The former FTX CEO is reportedly required to wear an ankle monitor and is only allowed to leave the house under certain circumstances, among other restrictions.
The aforementioned Palo Alto home, located on the border of Stanford University’s campus, is understood to be a $4 million property equipped with five bedrooms, three bathrooms and a pool, according to real estate listings.
The property has had to be barricaded on both ends, however, as Bankman-Fried has reportedly faced death threats, while his home has turned into something of a tourist attraction for curious onlookers.
His family is shelling out $10,000 a week for a private security firm, according to a Dec. 27 article from the New York Post.
As part of the Dec. 22 bond agreement, Bankman-Fried is required to wear an ankle bracelet, has been forced to surrender his passport and is also required to seek approval for any transactions in excess of $1,000. He is also not allowed to possess a firearm, any other weapon or “destructive device”.
He is only able to leave the property for exercise, substance abuse treatment or mental health treatment — something he is understood to have taken up — with multiple reports indicating he has been going for daily jogs with his security detail in tow.
While this is still a far cry from the Bahamas penthouse he was previously living in, it still appears far better than the conditions of his cell in Fox Hill prison in the Bahamas.
That being said, some in the crypto community have been vocal about Bankman-Fried’s release on bail, particularly considering he was able to do so without any upfront payment.
He’s reportedly already been visited by journalist Michael Lewis, author of the popular trading-focused books The Big Short, Liar's Poker and Flash Boys, who reportedly has been embedded with SBF for over months as part of a book project.
On Dec. 28, cryptocurrency vlogger Tiffany Fong revealed on Twitter she had visited Bankman-Fried in his parent’s home for a "conversation" just the night before.
Fong was one of the first to interview Bankman-Fried after the exchange went bankrupt in November, and is expected to write about the meeting after her holiday.
Bankman-Fried has denied criminal liability numerous times since the collapse of FTX. He is set to appear in a New York federal court on Jan. 3 to be arraigned on charges of wire fraud and conspiracy.
The California Department of Financial Protection and Innovation (DFPI) has fired off 17 separate warnings over two days against crypto brokers and websites it suspects of being fraudulent.
The list includes Tahoe Digital Exchange, TeleTrade Options, Tony Alin Trading Firm, Hekamenltd/Tosal Markets Limited, Trade 1960, Yong Ying Global Investment Company Limited, Unison FX, VoyanX.com, and ZC Exchange, to name a few.
Additionally, there are two copycat sites posing as two big names in the crypto sector: eth-Wintermute.net and UniSwap LLC.
At the time of writing, the DFPI's consumer alert page has posted 17 warnings over Dec. 27 and Dec. 28 stating that these companies “appear to be engaged in fraud against California consumers.”
It is not common for the DFPI to post so many alerts in one go, suggesting that the number of crypto scam reports may have ramped up in the latter stages of the year. The DFPI usually posts sporadic warnings about investigations into companies, or alerts of certain incidents.
The last time the DFPI sent out such a large batch of crypto scam alerts was on June 15, when it sounded the alarm bells over 26 dubious crypto platforms.
The warnings came in response to complaints from citizens against the brokers and websites, with the DFPI stating the individuals have reported having lost anywhere from $2,000 to as much as $1.2 million in certain cases. The DFPI however only goes as far as to say that these websites "appears to be engaged in fraud."
A key theme alleged in most of these warnings relates to pig-slaughtering scams, which involve an individual or group creating a fake identity online to build fake relationships or friendships via social media, messaging and dating apps.
In a pig slaughtering or romance scam, a fraudster would generally put weeks or months into building the fake kinship to gain the victim's trust, before gradually shifting the conversation toward investments and enticing them with investment “opportunities” that are often too good to be true.
Ultimately the end goal is to get the victim to invest in crypto via a copycat version of a legitimate website — such as UniSwap LLC and eth-Wintermute.net in this instance — or by transferring funds to a dodgy wallet address.
Accompanying pig slaughtering, the alleged scammers are said to have deployed another tactic described as the “Advance Fee Scheme,” where the bad actors will request large amounts of money to process the fake withdrawals from their scam sites.
If the victim falls for it, the scammer not only pockets the initial investment but an extra slice on top, before promptly cutting off all forms of contact.
“The DFPI urges consumers to exercise extreme caution before responding to any solicitation offering investment or financial services. To check whether an investment or financial service provider is licensed in California,” the DFPI stated.
This Daily Dose was brought to you by Cointelegraph.