Crypto-Wrap 2022: Key Industry Events Likened to a Wild West Year

2022 was a wild-west crypto year that saw the market experience several upsides and downsides, as well as a few significant milestones. We saw the launch of numerous decentralized innovations, and also saw the continual growth of decentralized finance (DeFi). We also saw the launch of Ethereum 2.0, which marked a major milestone in the transition from proof-of-work to proof-of-stake consensus.

The year also saw the introduction of a range of new regulations, with governments around the world taking different approaches to cryptocurrencies. Finally, we saw a number of high-profile cases of fraud and money laundering that served as a reminder for investors to always do their research before investing in any cryptocurrency. However, below is  a list of the top Crypto headlines throughout 2022:

Terra (LUNA) Collapse

The Terra network and its chief, Do Kwon, achieved great fame in the virtual currency world in a space of four years, all culminating in an unfortunate crash from the top.

The Luna cryptocurrency exchange experienced a catastrophic collapse, resulting in an approximate $60 billion loss and sending shockwaves throughout the worldwide crypto community.

TerraUSD/UST stablecoin and the Terra (LUNA) coin plummeted, and a colossal liquidity shortage occurred in the digital currency market which led to an even more catastrophic decrease in value. Up until this point, the Terra coin is yet to regain its footing.

Do Kwon, one of the creators behind Terraform Labs, provided information regarding a remedial proposal that would be able to rescue the pegged UST from continued devaluation.

Terra did provide more details about the approach to and spending of $1.4B UST and the staking of 240M LUNA as part of a recovery program; unfortunately, these specifics were unable to prevent market decline.

3AC Liquidation

Second, of this crypto wrap, 2022 is Singapore’s 3AC – a crypto hedge fund once handling an unprecedented $10 billion in assets – became another casualty of the current bearish environment, filing for bankruptcy.

Though the decline of 3AC seemed to be led by market forces, further evaluation revealed it was actually a consequence of a lack of supervision over its decision-making procedures.

In other words, the hedge fund carried out massive directional transactions with Grayscale Bitcoin Trust (GBTC), Luna Classic (LUNC) and Staked Ether while procuring capital from circa two dozen large-scale establishments.

The appalling May crypto debacle triggered a catastrophic downward trajectory in venture capital for the hedge fund, causing its collapse. This breakdown of payments has caused a domino effect across the cryptocurrency sector.

The closure of 3AC had disastrous repercussions for entities like BlockFi, Voyager, and Celsius which provided crypto lending services. As a result of their susceptibility to the consequences of 3AC, most of these companies file for bankruptcy.

Celsius Bankruptcy

The CEO of Celsius, Alex Mashinsky, officially inked a chapter 11 bankruptcy record that exposed the firm had roughly $4.3 billion in resources matched with an outstanding debt of $5.5 billion—yielding a $1.2 billion shortfall.

User deposits made up the majority of liabilities at $4.72 billion, while Celsius’ assets include CEL tokens assets valued at $600 million, mining assets worth $720 million and $1.75 billion in crypto assets.

Tornado Cash Sanctioning by OFAC

U.S. Treasury’s OFAC imposed sanctions on the virtual currency mixing service Tornado Cash, which was reported to have laundered an enormous amount worth up to $7 billion since its inception in 2019.

​​ The Lazarus Group, a hacking organization sponsored by the Democratic People’s Republic of Korea (DPRK) and sanctioned by the United States in 2019, perpetrated a record-breaking thievery worth $455 million.

Subsequently, law enforcers utilized Tornado Cash to swell over $96 million of illicit cyber agents’ capital accrued from the June 24, 2022, Harmony Bridge Larceny, and no less than $7.8 million from the August 2, 2022, Nomad Looting.

The move was based on the changes to Executive Order 13694  that followed OFAC’s designation of the digital asset scrambling service Blender.io (Blender) which took place on May 6th, 2022.

BNB-Chain Hack

On October 6th 2022, a vulnerability in the cross-chain bridge of BNB Chain resulted in a massive exploit by criminals, allowing attackers to gain access to approximately $100 million in virtual currency.

BNB Chain’s official Twitter account initially divulged a provisional suspension due to “suspicious activity” on the blockchain, but immediately afterwards revealed that it could be a possible exploit. Binance gave further information indicating the blockchain was going through maintenance, forbidding all deposits and withdrawals.

Ethereum Switch to Proof of Stake

After merging the Mainnet and the Beacon Chain, Ethereum’s blockchain completed its transition from a proof-of-work to a proof-of-stake consensus system with success.

On September 15th, the unification occurred and the network changed over to a Proof of Stake system seamlessly; this shift displaced hardware-based miners and introduced validators that committed Ether in return for authorizing transactions, adding fresh blocks, and preserving the system.

The co-founder of Ethereum, Vitalik Buterin, proposed a slow, five-stage process to eventually activate the final upgrade and thus, the merge.

The FTX-Contagion

This list cannot be complete without the FTX crash. On December 12th, 2022, the government of The Bahamas apprehended Bankman-Fried due to multiple counts of fraud in connection with FTX and a formal accusation by the U.S. Attorney of the Southern District of New York.

Without a bond, Bankman-Fried is still in confinement awaiting to be sent back to the United States. He plans to resist this extradition measure. When disclosing the allegations made against the ex-head of the company, U.S. Attorney Damian Williams expressed that it was one of the most noteworthy fiscal delinquencies experienced in American history.

On December 13, John Ray, the Chief Executive of FTX appointed by a court, stated to the United States House panel that there was no documentation kept for FTX. He further mentioned: “It was an archaic form of fraudulence.