Only a small fraction of Goldman’s customers were eligible to buy crypto-linked investments through the bank, said Mary Athridge, a spokeswoman for Goldman Sachs. Clients had to go through a “live training” session and testify that they had received warnings from Goldman about the risks of the assets. Only then were they allowed to deposit money into ‘third-party funds’ that the bank had first investigated.
Morgan Stanley clients could not put more than 2.5 percent of their total assets into such investments, and investors were able to invest in just two crypto funds — including the Galaxy Bitcoin Fund — run by outside managers with traditional banking backgrounds.
Still, those managers may not have escaped the crypto crash. Mike Novogratz, the CEO of Galaxy Digital and former Goldman banker and investor, told New York magazine last month that he had taken too much risk. Galaxy Digital Asset Management’s total assets under management, which peaked at nearly $3.5 billion in November, fell to approximately $1.4 billion at the end of May. to a recent revelation by the firm. Had Galaxy not a big part of Luna sold three months before it collapsed, Mr. Novogratz would have been in worse shape.
But while billionaire Mr. Novogratz and wealthy banking customers can easily survive their losses or be bailed out by strict regulations, private investors had no such safeguards.
Jacob Willette, a 40-year-old man in Mesa, Arizona, who works as a DoorDash delivery man, kept his entire savings in an account at Celsius that promised a high return. At its peak, its stored value was $120,000, Mr. Willette.
He planned to use the money to buy a house. When crypto prices started to fall, Mr. Willette to the reassurance of Celsius executives that his money was safe. But all he found online were evasive responses from corporate executives as the platform struggled, eventually freezing over $8 billion in deposits.
Celsius representatives did not respond to requests for comment.
“I trusted these people,” Mr. Willette said. “I just don’t see how what they did isn’t illegal.”