The 2022 crypto collapse cascade — Terra/LUNA → 3AC → Celsius/Voyager/BlockFi → Genesis/DCG → FTX/Alameda, the founders, and the prosecutions

Built 2026-06-20 from research/spec-crypto-collapse-cluster.json. The domino chain the corpus referenced (the "wiped investors" sink, the Terra failure) but never drew. Companion to macro-stablecoin-failures-manipulation (Terra), spec-cross-system-contagion (propagation), spec-crypto-enforcement-actors (the prosecutors), spec-crypto-sec-epstein.

Frame. The 2022 cascade erased ~$2T of crypto market cap and produced the decade's largest financial-fraud prosecutions. This block wires the sequence, the principals, and where they ended up — feeding the SINK_investors wipeout node and the enforcement pendulum. Discipline. Collapses, amounts, sentences, and corporate structures are fact (adjudicated / public record). Litigated-but-not-adjudicated items (the DCG/Genesis drain allegations) are labeled as such. The "fraud, not blockchain failure" reading is graded interpretation. Overlay; excluded from the proofs.

1. The cascade (order matters)

1. Terra/LUNA (Terraform Labs, Do Kwon) — the algorithmic stablecoin UST de-pegged in May 2022, vaporizing ~$40B+ and detonating the chain.
2. Three Arrows Capital (3AC; Su Zhu, Kyle Davies) — a ~$10B hedge fund long Luna/GBTC/staked-ETH on borrowed money; insolvent within weeks, defaulting across the lending sector.
3. The lenders — 3AC's defaults blew up Celsius (Mashinsky), Voyager, BlockFi, and Genesis; withdrawals froze, bankruptcies followed through mid-2022.
4. DCG / Genesis — Genesis (owned by Digital Currency Group, Barry Silbert; sibling to Grayscale/GBTC) was central to the inter-lender web; Genesis later sued its own parent DCG + Silbert to recover billions allegedly drained.
5. FTX / Alameda (Nov 2022) — separately, FTX's hedge fund Alameda (Caroline Ellison) had been secretly funded with FTX customer deposits; a run exposed an ~$8B hole, collapsed the #2 exchange, took down BlockFi (which FTX had "rescued"), and froze Gemini Earn (run through Genesis).

2. The principals and outcomes

3. The survivors (the distinction the narrative flattens)

The exchanges/issuers that didn't commingle or over-lever largely survived and are now incumbents — Coinbase (Brian Armstrong), Binance (CZ — though he pleaded guilty to BSA failures), Gemini (the Winklevoss twins — though Gemini Earn froze). The collapse was a solvency/fraud event concentrated in the leverage-and-commingling firms, not a blockchain-technology failure — a distinction the "crypto is a scam" framing erases. (Graded interpretation.)

4. Adjacent enforcement (graded separately)

• SEC v. Tron / Justin Sun — fraud + manipulation allegations; paused in 2025 after Sun invested ~$75M in the Trump-linked World Liberty Financial and became an advisor (a documented conflict-of-timing; influence-operator-network).
• Grayscale v. SEC — Grayscale won; the spot-BTC-ETF denial was ruled "arbitrary and capricious," forcing approvals.
• BitMEX / Arthur Hayes — BSA guilty plea (2022); pardoned by Trump (2025).

5. The honest reading

Two things are simultaneously true, and the narrative usually collapses them: (1) there was massive, real, adjudicated fraud (FTX customer theft, Celsius lies, Terra's misrepresentations) that destroyed retail savers and warranted the prosecutions; and (2) the failure mode was leverage + commingling + unbacked yield — the oldest forms of financial fraud wearing crypto clothing — not a novel property of blockchains, and the survivors prove the distinction. The wipeout fed the SINK_investors node; the prosecutions fed the enforcement pendulum (spec-crypto-enforcement-actors).

Sources: CoinDesk — SBF 25 years; CNBC — Ellison 2 years/$11B; CoinDesk — Do Kwon 15 years; CNBC — Mashinsky 12 years; Blocmates — Genesis v. DCG/Silbert.

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