BLOG
/
Crypto Taxes
checkCircle
Expert verified
7 min read

Celsius & Voyager Crypto Losses - Are They Tax Write Offs?

Celsius & Voyager Crypto Losses - Are They Tax Write Offs?
Celsius & Voyager Crypto Losses - Are They Tax Write Offs?
info
Our Editorial Standards:
Our content is designed to educate the 400,000+ crypto investors who use the CoinLedger platform. Though our articles are for informational purposes only, they are written in accordance with the latest guidelines from tax agencies around the world and reviewed by certified tax professionals before publication. Learn More
on this page
close

Are you worried about losing money due to an exchange shutdown? 

In 2022, exchanges like Celsius, Voyager, CoinFLEX, and Babel paused withdrawals for all customers due to liquidity issues and uncertainty in the crypto markets. 

In this article, we’ll break down how funds may be distributed in the case of a potential exchange bankruptcy, as well as the tax implications of losing access to your cryptocurrency. 

Will I get my cryptocurrency back? 

There’s been speculation that with recent market volatility, some exchanges are at risk of bankruptcy. If bankruptcy proceedings move forward, the question of ‘Will I get my crypto back’ becomes more nuanced and complicated. 

The answer may depend on the specific facts and circumstances of the bankruptcy proceedings. 

At a high level, when a company files for bankruptcy, the creditors take control of the company. From here, they must collectively decide whether to liquidate the entire company and all associated assets or ‘restructure’ the company in an effort to maximize shareholder value. 

This is typically a long process as there are many stakeholders at the table to negotiate the restructuring or liquidation.

If you’re a customer of a bankrupt exchange, you’ll likely be considered an ‘unsecured creditor’. If the exchange’s assets are liquidated, other creditors will likely receive preferred access to the proceeds. As a result, you may or may not receive access to your proceeds. 

Instead of liquidating all company assets, if the creditors of the company collectively decide that “restructuring” the company with the goal of getting it back to an operating state makes more sense, you may regain the ability to withdraw/deposit your assets again at some point in the future. 

Can I write off my lost crypto on my taxes in the case of bankruptcy? 

It’s unclear how investors should treat crypto lost due to exchange bankruptcies on their tax returns. At this point, it may be too early to tell since investors currently don’t know whether or not they will receive their investment back - or to what extent. 

Some tax professionals argue that losing access to your crypto because of an exchange bankruptcy can be considered an investment loss. 

Typically, you are required to dispose of your assets in order to claim a capital loss. If you meet the criteria to consider your investment as “worthless”, you can claim the loss. However, by doing so you are relinquishing your rights to claim the assets in the future. 

Investment losses can offset your capital gains during the year and up to $3,000 of income. Any losses above this amount can be rolled forward into future tax years. 

Another option is to treat lost cryptocurrency as a casualty loss — a property loss stemming from a sudden, unexpected, or unusual event. After 2017, these types of losses no longer qualify as tax-deductible through 2025, when they once again become deductible as an itemized deduction on Schedule A. 

For more information, check out our guide on how lost & stolen cryptocurrency is taxed. 

If you are using a service where you loan your crypto to the platform (this relationship may be described in the ‘Terms of Use’ of the exchange) there may be an opportunity to claim the loss as a nonbusiness bad debt if you meet all the criteria required.  

My cryptocurrency got liquidated because I couldn’t post collateral. How is this taxed? 

Some investors found that their margin positions were liquidated because their exchanges did not allow them to post additional collateral. 

Unfortunately, liquidations are considered taxable events. You’ll incur a capital gain or loss depending on how the price of your crypto has changed since you originally received it. 

For more information, check out our guide on how cryptocurrency margin trades are taxed

I received staking rewards but I couldn’t withdraw them.

Some exchanges continued to pay out staking rewards to customers, despite the fact that they had no way to withdraw their rewards. 

Typically, staking rewards are considered income at the time of receipt. 

However, because there is no way for investors to withdraw their staking rewards, it’s likely that this income can be considered non-taxable. 

How can I report my cryptocurrency taxes? 

Looking for an easy way to report your cryptocurrency taxes? CoinLedger can help. 

CoinLedger automatically integrates with major exchanges and blockchains, so that you can file your taxes in minutes. The platform is trusted by more than 400,000 crypto investors across the globe. 


Get started with a free preview report today — there’s no need to enter your credit card details until you’re 100% sure your information is correct!

Frequently asked questions

  • MinuPlus
  • MinuPlus
  • MinuPlus
  • MinuPlus
  • MinuPlus
  • MinuPlus
...
Want to try CoinLedger for free? Claim your free preview tax report.

Join 400,000 people instantly calculating their crypto taxes with CoinLedger.

How we reviewed this article

Edited By
Sources

All CoinLedger articles go through a rigorous review process before publication. Learn more about the CoinLedger Editorial Process.

CoinLedger has strict sourcing guidelines for our content. Our content is based on direct interviews with tax experts, guidance from tax agencies, and articles from reputable news outlets.

KNOWLEDGE BASE

Demystify Crypto Taxes

The Ultimate Crypto Tax Guide (2023)

This guide breaks down everything you need to know about cryptocurrency taxes, from the high level tax implications to the actual crypto tax forms you need to fill out.

Crypto taxes overview
howToHandleCryptocurency
Crypto Tax Rates 2023: Complete Breakdown

Here’s how much tax you'll be paying on your income from Bitcoin, Ethereum, and other cryptocurrencies.

Crypto tax rates
howToReportCryyptoLosses
How Crypto Losses Can Reduce Your Taxes

Crypto and bitcoin losses need to be reported on your taxes. However, they can also save you money.

How crypto losses lower your taxes
ellipseellipsecalculator

Calculate Your Crypto Taxes

  • Check
    No credit card needed
  • Check
    Instant tax forms
  • Check
    No obligations
Get Started For Free
percent
ellipseellipse
Jump to
list