Only a small subset of Goldman’s clients qualified to purchase investments linked to crypto through the bank, said Mary Athridge, a Goldman Sachs spokeswoman. Clients needed to undergo a “live training” session and attest to having received warnings from Goldman in regards to the riskiness of the assets. Only then were they allowed to place money into “third party funds” that the bank had examined first.
Morgan Stanley clients couldn’t put greater than 2.5 percent of their total net value into such investments, and investors could spend money on only 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 chief executive of Galaxy Digital and a former Goldman banker and investor, told Recent York magazine last month that he had taken on an excessive amount of risk. Galaxy Digital Asset Management’s total assets under management, which peaked at nearly $3.5 billion in November, fell to around $2 billion by the tip of May, in keeping with a recent disclosure by the firm. Had Galaxy not sold a significant chunk of Luna three months before it collapsed, Mr. Novogratz would have been in worse shape.
But while Mr. Novogratz, a billionaire, and the rich bank clients can easily survive their losses or were saved by strict regulations, retail investors had no such safeguards.
Jacob Willette, a 40-year-old man in Mesa, Ariz. who works as a DoorDash delivery driver, stored his entire life savings in an account with Celsius that promised high returns. At its peak, the stored value was $120,000, Mr. Willette said.
He planned to make use of the cash to purchase a house. When crypto prices began to slide, Mr. Willette searched for reassurance from Celsius executives that his money was protected. But all he found online were evasive answers from company executives because the platform struggled, eventually freezing greater than $8 billion in deposits.
Celsius representatives didn’t reply to requests for comment.
“I trusted these people,” Mr. Willette said. “I just don’t see how what they did isn’t illegal.”