The crypto market, which swelled in the years after the pandemic, changed direction sharply in 2022. As asset prices plunged, weaknesses in corporate balance sheets came into view. Firms that had lent to one another and piled into similar risks quickly became part of a chain reaction that spread across the industry.
Terra Marked The First Major Shock
The first major break that accelerated the crisis came in the Terra ecosystem. Algorithmic stablecoin TerraUSD lost its dollar peg in May 2022, falling to 67 cents before collapsing further. Together with Luna, it became the center of one of the harshest meltdowns the crypto market had seen, deepening the loss of confidence across the sector.
Funds And Lending Platforms Fell Apart
After the Terra shock, attention turned to companies with heavy exposure to the project. Crypto hedge fund Three Arrows Capital filed for Chapter 15 bankruptcy protection in the United States on July 1, 2022. Once seen as one of the market’s most aggressive players, 3AC became one of the key links in the collapse that followed.
The downfall of 3AC delivered one of the fastest blows to crypto lenders. Voyager Digital filed for bankruptcy on July 6, 2022 after a large loan extended to the hedge fund went unpaid. The company’s unrecovered claim against 3AC exceeded $650 million. The case laid bare how deeply intertwined crypto firms had become through cross-company lending.
Celsius was hit in the same period. After freezing withdrawals, the company sought bankruptcy protection in July 2022. The platform, which had built its name on promises of high returns, soon became one of the clearest examples of a liquidity crunch in crypto. It also highlighted how vulnerable firms could be when they operated like banks without being regulated like banks.
Confidence In Exchanges Crumbled
One of the heaviest blows to the market came from FTX. The exchange, along with trading arm Alameda Research and around 130 affiliated entities, entered Chapter 11 proceedings in November 2022. At the center of the collapse were questions over the handling of customer assets and internal financial ties. Founder Sam Bankman-Fried was later convicted, turning the case into one of the most consequential corporate scandals in crypto history.
BlockFi did not survive the fallout either. The company filed for bankruptcy in November 2022, with exposure to FTX cited as one of the main reasons. Although BlockFi emerged from bankruptcy in October 2023, it moved toward winding down operations and returning assets to customers rather than rebuilding its business. The episode underscored how the crisis spread not through isolated failures, but through tightly connected firms.
The Bankruptcy Wave Spread Across Years
The damage did not end in 2022. Genesis’s lending arm filed for bankruptcy protection in the United States in January 2023. The company owed creditors at least $3.4 billion. A court later approved a plan to return roughly $3 billion in cash and crypto to customers, showing that the financial and legal fallout from the first wave of failures would last for years.
The mining side of the industry was hit as well. Core Scientific entered bankruptcy in December 2022 as falling Bitcoin prices, rising energy costs and unpaid obligations tied to Celsius added pressure to its business. Its restructuring plan was approved in January 2024. The case showed that the damage was not limited to exchanges and lenders, but had spread to the industry’s infrastructure layer as well.
Terraform Labs offered another striking example. While the collapse of TerraUSD and Luna took place in 2022, the company itself filed for bankruptcy in the United States in January 2024. Founder Do Kwon, meanwhile, faced legal proceedings in multiple jurisdictions. In September 2024, a court approved the company’s plan to wind down operations. The case showed how the shock that began in 2022 continued to leave delayed but lasting scars on crypto firms.
Common Weaknesses Came Into View
The wave of failures exposed a familiar set of weaknesses across the sector. High leverage, weak risk controls, dense borrowing ties between companies, opaque handling of customer funds and limited oversight surfaced again and again. What unfolded in crypto was not only a market selloff, but also a broader crisis of business models and governance.
Today, some firms have moved into liquidation, some have restructured, and others are still trying to close their cases through creditor repayments.
FTX’s liquidation plan was approved in October 2024. Court proceedings showed that recovered assets could reach as much as $16.5 billion. Even so, that did not change the broader picture. Some of the companies that once symbolized crypto’s limitless growth story unraveled at remarkable speed. In the post-2020 era, the most striking story in crypto was not only the collapse of coins, but the collapse of the companies behind them.
