Crypto billionaires' vast fortunes destroyed in weeks

Coinbase Global founder Brian Armstrong (left) and Binance CEO Zhao Changpeng both reported personal fortune losses. PHOTOS: REUTERS

NEW YORK (BLOOMBERG) - It has been a long few weeks since the crypto crowd was partying in Miami.

Coinbase Global founder Brian Armstrong had a personal fortune of US$13.7 billion (S$19 billion) as recently as November and about US$8 billion at the end of March. It is now just US$2.3 billion, according to the Bloomberg Billionaires Index, after a sell-off in digital currencies from Bitcoin to Ether triggered a precipitous decline in the market value of Coinbase, the largest United States cryptocurrency exchange.

The firm's shares have tumbled nearly 86 per cent since their April 2021 initial public offering till Wednesday (May 11), after the company warned that trading volume and monthly transacting users were expected to be lower in the second quarter than in the first.

It has raised questions about Coinbase's ability to withstand the sharp decline in crypto prices, forcing Mr Armstrong to take to Twitter to defend the company. There is "no risk of bankruptcy" even amid a "black swan" event and users' funds are safe, said Mr Armstrong, the firm's chief executive officer.

Then there is Mr Michael Novogratz. The CEO of crypto merchant bank Galaxy Digital has seen his fortune plummet to US$2.9 billion, from US$8.5 billion in early November. He has been a champion of TerraUSD, the algorithmic stablecoin that is now at risk of a complete collapse amid a breakdown in the price of a crypto token in the same ecosystem, Luna.

"I am probably the only guy in the world who has got both a Bitcoin tattoo and a Luna tattoo," Mr Novogratz said at the Bitcoin 2022 conference in Miami on April 6.

Billionaire crypto fortunes that swelled over the last two years are disappearing after a sell-off that began with tech stocks spilled over into digital money. Bitcoin, the most popular cryptocurrency, and Ether have both fallen more than 50 per cent since their record highs late last year.

While almost all crypto holders have suffered wealth declines, some of the biggest and most visible losses are concentrated among founders of exchanges, where traders buy and sell digital currencies.

At least on paper, Mr Zhao Changpeng, the CEO of closely held Binance, has lost an even larger fortune than Mr Armstrong or Mr Novogratz.

He debuted on the Bloomberg wealth index in January with a net worth of US$96 billion, one of the world's largest. By Wednesday, that had shrunk to US$16 billion, using the average enterprise value-to-sales multiples of Coinbase and Canadian crypto firm Voyager Digital as a basis for the calculations.

Crypto exchanges in the US appear to be suffering more of a downturn than their global competitors. Trading volumes at Coinbase have steadily fallen since the beginning of the year, while more internationally focused Binance saw an uptick in volume last month. Binance's US-focused business, by comparison, experienced even steeper declines than Coinbase's.

Crypto entrepreneurs and brothers Tyler and Cameron Winklevoss, co-founders of rival crypto exchange Gemini, have each lost about US$2.1 billion - or roughly 40 per cent - of their wealth this year. The fortune of Mr Sam Bankman-Fried, CEO of crypto exchange FTX, has fallen by half since the end of March to about US$13 billion.

Mr Armstrong is not the only Coinbase billionaire losing money. Co-founder Fred Ehrsam, a former Goldman Sachs Group trader, is currently worth US$1.3 billion, down more than 60 per cent this year.

Mr Armstrong owns 16 per cent of Coinbase and controls 59.5 per cent of its voting shares, according to the company's 2022 proxy statement, while Mr Ehrsam has a 4.5 per cent stake and controls 26 per cent of its voting stock.

Coinbase's bonds have also plunged, recently trading in line with some of the riskiest junk-rated notes.

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