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How Wall Street Can Get Out of the Crypto Crisis

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How Wall Street Can Get Out of the Crypto Crisis


Goldman spokeswoman Mary Athridge said only a small percentage of Goldman clients are eligible to buy cryptocurrency-related investments through the bank. Clients must pass an “on-site training” course and demonstrate that they have been warned by Goldman Sachs about asset risks. Only then will they be allowed to put money into “third party funds” that the bank checks first.

Morgan Stanley clients cannot use more than 2.5 percent of their total net worth in such investments, and investors can only invest in two crypto funds — including the Galaxy Bitcoin Fund — managed by outside managers with traditional banking backgrounds.

Still, these managers may not be able to escape the cryptocurrency crash. Galaxy Digital CEO Mike Novogratz, a former Goldman Sachs banker and investor, told New York magazine last month that he took too much risk. Total assets under management at Galaxy Digital Asset Management peaked at nearly $3.5 billion in November and fell to around $2 billion by the end of May, according to the company’s most recent disclosures. Mr Novogratz would have been worse off if Galaxy had not sold most of Luna three months before it collapsed.

But while billionaire Mr. Novogratz and wealthy bank clients can easily survive losses, or be salvaged by strict regulation, retail investors have no such safeguards.

Jacob Willette, a 40-year-old DoorDash delivery driver in Mesa, Arizona, put his life savings into a Celsius account that promised high returns. At its peak, Mr. Willett said, the stored value was $120,000.

He plans to use the money to buy a house. When cryptocurrency prices began to slide, Mr. Willett sought reassurance from Celsius executives that his money was safe. But all he found online was a evasive answer from company executives as the platform struggled, eventually freezing more than $8 billion in deposits.

A representative for Celsius did not respond to a request for comment.

“I trust these people,” Mr Willett said. “I just don’t understand what they’re doing isn’t illegal.”

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