How Wall Street Avoided the Cryptocurrency Crash

According to Goldman Sachs spokeswoman Mary Atridge, only a small subset of Goldman customers are eligible to buy crypto-related investments through a bank. Clients had to complete “live training” and confirm that they had received warnings from Goldman about the riskiness of the assets. Only after that they were allowed to invest in “third party funds”, which the bank had previously checked.

Morgan Stanley clients could not invest more than 2.5% of their total wealth in such investments, and investors could only invest in two cryptocurrency funds, including the Galaxy Bitcoin Fund, which are managed by third-party managers with traditional banking experience.

However, these managers may not have been spared the collapse of the cryptocurrency. Mike Novogratz, CEO of Galaxy Digital, former banker and Goldman investor, said New York Magazine last month that he took too big a risk. Galaxy Digital Asset Management’s total assets under management, which peaked at nearly $3.5 billion in November, fell to around $1.4 billion by the end of May. to the recent revelation firm. Galaxy didn’t sell most of the moon three months before he collapsed, Mr. Novogratz would have been in worse shape.

But while Mr. Novogratz, the billionaire, and wealthy bank clients could easily survive their losses or be rescued by strict rules, retail investors had no such guarantees.

Jacob Willett, 40, Mesa, Arizona. who works as a DoorDash delivery driver kept all his savings in a Celsius account that promised high returns. At its peak, the stored value was $120,000. Willett said.

With this money, he planned to buy a house. When cryptocurrency prices began to fall, Mr. Willett waited for assurances from Celsius executives that his money was safe. But all he found online were evasive responses from company executives as the platform struggled, eventually freezing more than $8 billion in deposits.

Celsius representatives did not respond to requests for comment.

“I trusted these people,” Willett said. “I just don’t understand how what they did isn’t illegal.”