Only a small subset of Goldman clients were qualified to buy crypto-related investments through the bank, said Mary Athridge, a spokeswoman for Goldman Sachs. Clients had to complete a “live training” session and attest to having received asset risk warnings from Goldman. Only then were they allowed to put money into “third party funds” which the bank had first reviewed.
Morgan Stanley clients could invest no more than 2.5% of their total net worth in such investments, and investors could only invest in two crypto funds – including the Galaxy Bitcoin Fund – managed by external managers with a traditional banking experience.
Yet these managers may not have escaped the crypto crash. Mike Novogratz, chief executive of Galaxy Digital and a former Goldman banker and investor, told New York magazine last month that he had taken too many risks. Galaxy Digital Asset Management’s total assets under management, which peaked at nearly $3.5 billion in November, fell to around $2 billion at the end of May, according to a recent company disclosure. Had Galaxy not sold much of Luna three months before its collapse, Mr. Novogratz would have been in worse shape.
But while Mr. Novogratz, a billionaire, and wealthy bank customers can easily survive their losses or have been rescued by strict regulations, retail investors had no such safeguards.
Jacob Willette, a 40-year-old man in Mesa, Arizona, who works as a DoorDash delivery driver, stored all of his savings in an account at Celsius that promised high returns. At its peak, the stored value was $120,000, Mr. Willette said.
He planned to use the money to buy a house. When crypto prices started falling, Mr. Willette sought to reassure Celsius executives that his money was safe. But all he found online were stonewalling responses from company executives as the platform struggled, ultimately freezing more than $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.”