From CZ to SBF, 2023 was the year of the fallen crypto bro

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Written By Sedoso Feb

Aurich Lawson | Getty Images (Bloomberg/Antonio Masiello)

Looking back, 2023 will likely be remembered as the year of the fallen crypto bro.

While celebrities like Kim Kardashian and Matt Damon last year faced public backlash after shilling for cryptocurrency, this year’s top headlines traced the downfalls of two of the most successful and influential crypto bros of all time: FTX co-founder Sam Bankman-Fried (often referred to as SBF) and Binance founder Changpeng Zhao (commonly known as CZ).

At 28 years old, Bankman-Fried made Forbes’ 30 Under 30 list in 2021, but within two short years, his recently updated Forbes profile notes that the man who was once “one of the richest people in crypto” in “a stunning fall from grace” now has a real-time net worth of $0.

In November, Bankman-Fried was convicted by a 12-member jury of defrauding FTX customers, after a monthlong trial where federal prosecutors accused him of building FTX into “a pyramid of deceit.” The trial followed months of wild headlines—comparing Bankman-Fried to a cartoon villain, accusing Bankman-Fried of stealing $2.2 billion from FTX customers to buy things like a $16.4 million house for his parents, and revealing that Bankman-Fried casually joked about losing track of $50 million.

Defending against his crimes at FTX, Bankman-Fried argued that “dishonesty and unfair dealing” aren’t fraud and even claimed that he couldn’t recall what he did at FTX, while FTX scrambled to recover $7.3 billion and put out the “dumpster fire.”

Ultimately, Bankman-Fried’s former FTX/Alameda Research partners, including his ex-girlfriend Caroline Ellison, testified against him. Ellison’s testimony led to even weirder revelations about SBF, like Bankman-Fried’s aspirations to become US president and his professed rejection of moral ideals like “don’t steal.” By the end of the trial, it seemed like very few felt any sympathy for the once-FTX kingpin.

Bankman-Fried now faces a maximum sentence of 110 years. His exact sentence is scheduled to be determined by a US district judge in March 2024, Reuters reported.

While FTX had been considered a giant force in the cryptocurrency world, Binance is still the world’s biggest cryptocurrency exchange—and considered more “systemically important” to crypto enthusiasts, Bloomberg reported. That’s why it was a huge deal when Binance was rocked by its own scandal in 2023 that ended in its founder and CEO, Zhao, admitting to money laundering and resigning.

Arguably Zhao’s fall from grace may have been more shocking to cryptocurrency fans than Bankman-Fried’s. Just one month prior to Zhao’s resignation, after FTX collapsed, The Economist had dubbed CZ as “crypto’s last man standing.”

Zhao launched Binance in 2017 and the next year was featured on the cover of Forbes’ first list of the wealthiest people in crypto. Peering out from under a hoodie, Zhao was considered by Forbes to be a “crypto overlord,” going from “zero to billionaire in six months,” where other crypto bros had only managed to become millionaires.

But 2023 put an abrupt end to Zhao’s reign at Binance. In March, the Commodity Futures Trading Commission (CFTC) sued Binance and Zhao over suspected money laundering and sanctions violations, triggering a Securities and Exchange Commission lawsuit in June and a Department of Justice (DOJ) probe. In the end, Binance owed billions in fines to the DOJ and the CFTC, which Secretary of the Treasury Janet Yellen called “historic penalties.” For personally directing Binance employees to skirt US regulatory compliance—and hide more than 100,000 suspicious transactions linked to terrorism, child sexual abuse materials, and ransomware attacks—Zhao now personally owes the CFTC $150 million.

On the social media platform X (formerly Twitter), Zhao wrote that after stepping down as Binance’s CEO, he will be taking a break and likely never helming a startup ever again.

“I am content being [a] one-shot (lucky) entrepreneur,” Zhao wrote.

Other fallen crypto bros

SBF and CZ are likely the most high-profile crypto bros that fell from grace in 2023, but they certainly weren’t the only ones.

In February, Terraform Labs co-founder Do Kwon was arrested for defrauding investors in crypto schemes. According to the SEC, “Terraform and Kwon marketed crypto asset securities to investors seeking to earn a profit, repeatedly claiming that the tokens would increase in value,” but really the tokens were plummeting to zero—”causing devastating losses for investors.”

A few months later, in May, a former Coinbase product manager, Ishan Wahi, was sentenced to two years in prison for running the first cryptocurrency insider trading scheme to be officially investigated by the DOJ. Wahi had spent 10 months tipping off his brother and friend to upcoming Coinbase crypto asset listings and helping them unfairly snatch approximately $1.5 million in profits. At his sentencing hearing, Wahi said that he made “a huge mistake” that will follow him for the rest of his life.

It seemed like the sketchy behavior at Coinbase went beyond Wahi’s scheme, though. The very next month, the SEC sued Coinbase—which is the largest cryptocurrency exchange operating in the US—alleging that Coinbase made “calculated decisions” to skirt regulatory requirements that “may have allowed it to earn billions” while knowingly depriving Coinbase investors of SEC protections. As is the reputation of money-hungry crypto bros seeking to become overnight millionaires, Coinbase appeared to care more about its own surging profits than protecting vulnerable investors.

As summer turned to fall, more crypto execs were arrested. In July, ex-Celsius Network CEO Alex Mashinsky was arrested in connection with multibillion-dollar fraud and market manipulation schemes. “He is accused of waging a multiyear scheme to mislead customers before Celsius collapsed with more than $1 billion in debt,” Bloomberg reported. Then in September, Three Arrows Capital co-founder Su Zhu was arrested in Singapore after failing to cooperate with liquidators investigating the failed hedge fund, The New York Times reported. He and another Three Arrows founder, Kyle Davies, were sentenced to four months in prison.

Finally, in November, the DOJ and SEC sued Thomas Smith, Kyle Nagy, and Braden Karony for “defrauding investors in a decentralized finance digital asset called ‘SafeMoon.'” The DOJ charged the SafeMoon guys with “misappropriating millions of investors’ funds for their own use” to buy things like a custom Porsche 911 sportscar and real estate in New Hampshire, Utah, and Florida. Recently, SafeMoon filed for bankruptcy, the Salt Lake Tribune reported.

Average crypto bros stumbled, too

But it wasn’t just founders and managers of cryptocurrency companies that faced consequences for crypto schemes this year. Average crypto bros stumbled, too.

Perhaps most notoriously, buyers of Bored Ape Yacht Club (BAYC) NFTs sued BAYC creator Yuga Labs after realizing that the blockchain-based non-fungible tokens were a bad investment in August. In their complaint, they said that they felt swindled by a Sotheby’s auction that allegedly inflated prices and duped investors by giving the Bored Ape NFTs “an air of legitimacy… to generate investors’ interest and hype around the Bored Ape brand.” The auction collectively sold for $24.4 million, with an average price over $241,000 per token. The Bored Ape NFTs now sell for a floor price of about $57,000 worth of ether cryptocurrency, according to CoinGecko.

Adding insult to injury, over 20 fans of BAYC were stung again in November, when Yuga Labs held a Hong Kong event called ApeFest where UV lights burned attendees’ eyes and skin. For those impacted, their injuries—which typically resolved in hours to days—did not cut as deep as complete financial ruin, but experts said that the BAYC members may have experienced extreme pain and altered vision.

Perhaps the most unusual cryptocurrency scheme uncovered this year, though, was not devised by a crypto bro helming an empire but allegedly by an IT director in a Massachusetts school. In February, a former town employee of Cohasset, Massachusetts, Nadeam Nahas, was accused of stealing thousands of dollars in electricity from a local middle/high school to operate a secret cryptocurrency mine in an overlooked crawlspace. Accused of seeking to spike profits by eliminating the high electricity cost of mining cryptocurrency, Nahas has since pleaded not guilty but was forced to resign from his position while law enforcement investigates.

Most recently, the DOJ this December unsealed an indictment charging four individuals in the US—Lu Zhang of Alhambra, California; Justin Walker of Cypress, California; Joseph Wong of Rosemead, California; and Hailong Zhu of Naperville, Illinois—”with conspiracy to commit money laundering, concealment money laundering, and international money laundering.”

According to the DOJ, their “pig butchering” fraud scheme allegedly involved scamming victims on dating sites and social media out of more than $20 million by slowly gaining their trust and then “eventually introducing the idea of making a business investment using cryptocurrency.” After sending funds to scammer-controlled accounts, victims would be induced to make more investments, the DOJ alleged, once the scammers showed false but “significant gains” on their initial “investment.” So far, only Zhang and Walker have been arrested, the DOJ reported.

Forbes suggested that while 2023 may have “permanently” altered “many people’s view towards crypto,” ultimately—despite all these schemes and more coming to light—2023 was still a “great year for crypto.” An estimated $293 billion was funneled into crypto, Forbes reported, making 2023 the third-highest year for money transferred into crypto overall.

It’s possible, Forbes reported, that this year’s high inflows combined with the purge of scheming crypto bros may have created a surge in optimism for enthusiasts eager for crypto to make its big comeback.


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