If you’re like most people you probably think a bank or crypto exchange is far more qualified to take care of your bitcoins than you are. You’re just not that reliable right? You don’t really know what you’re doing when it comes to all this “Bitcoin self custody” stuff and it’s just easier to let them manage it for you right? Right???
Wrong.
Crypto exchange bankruptcies are ever constant and have been repeated over and over again since the literal dawn of exchanges. At every turn, in every year, through ups and down, due to fraud, mismanagement, domino effects, over leverage, too much risk and more they fail spectacularly and it’s always you, the customer that gets punished with the loss of your funds. People have even lost non-crypto funds that are kept in Fiat Wallets.
This page lists crypto exchange bankruptcies in the hopes that you learn an important lesson:
Don’t Use Trusted Third Parties!
Contents
Crypto Exchange Bankruptcies
Get your own Bitcoin Wallet, learn about Bitcoin Privacy and take custody of your funds now. Not tomorrow. Now. Companies always claim that your funds are “safe” in their hands. They are liars.
Prime Trust
- Fate: After coming under new management, they lost the keys to tens of millions in user funds. Their payments subsidiary, Banq filed for bankruptcy and the Nevada regulators ordered Prime Trust to end operations after “willfully breaching its fiduciary duties”
- Bankruptcy Date: 14nd of June, 2023
- Funds Lost: Liabilities between $17 million to $82 million
- Lesson: Don’t use trusted third parties!
Bittrex (USA)
- Fate: After operating for years acting as an exchange, brokerage and clearing agency the SEC sued Bittrex for operating without a proper license. They ceased all operations in the US effective April 30, 2023 but will continue outside the USA under their Bittrex Global company Full Story Here
- Bankruptcy Date: 8th of May, 2023
- Funds Lost: 100,000+ creditors and liabilities between $500 million to $1 billion
- Lesson: Don’t use trusted third parties!
BlockFi
- Fate: After the massive collapse of LUNA/UST, the hedge fund 3AC (see below) collapsed. BlockFi had significant exposure to 3AC and so was in quite a bit of trouble until FTX gave them a revolving line of credit to help keep them stable. Unfortunately FTX then later also collapsed (see below) resulting in BlockFi soon following suit. Full Story Here
- Bankruptcy Date: 28th of November, 2022
- Funds Lost: 100,000+ creditors and liabilities in the billions
- Lesson: Don’t use trusted third parties!
FTX
- Fate: Once the world’s third-largest cryptocurrency exchange by volume, FTX collapsed in a matter of days after it was revealed the bulk of their “assets” were in fact worthless tokens that they themselves had created (FTT) and were being used as collateral. This lead to customer panic and a bank run which drained their reserves and collapsed the value of FTT, leading to the entire company going under. Full Story Here
- Bankruptcy Date: 11th of November, 2022
- Funds Lost: $9 billion
- Lesson: Don’t use trusted third parties!
Hodlnaut
- Fate: Similar to Zipmex, Hodlnaut was a crypto lender placed under interim judicial management by the Singapore Court. They have also suspended customer withdrawals.
- Bankruptcy Date: August, 2022
- Funds Lost: $193 million
- Lesson: Don’t use trusted third parties!
Zipmex
- Fate: A crypto exchange based in Thailand, Zipmex filed for debt relief in Singapore after defaulting on a $53 million debt. Once again, all customer withdrawals were suspended with this appearing to just be due to poor management.
- Bankruptcy Date: 21st of July, 2022
- Funds Lost: $53 million
- Lesson: Don’t use trusted third parties!
Celsius
- Fate: Celsius which was a crypto lending and staking platform collapsed due to not having enough liquidity during the bear market of 2022. This was brought on by the LUNA/UST crash with the typical first sign being them stopping customer withdrawals. Everything went down hill from there. Full Story Here
- Bankruptcy Date: 14th of July, 2022
- Funds Lost: $1.2 billion
- Lesson: Don’t use trusted third parties!
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Three Arrows Capital (3AC)
- Fate: Once one of the largest crypto hedge funds managing around $10 billion in investor funds, it ran out of liquidity during the 2022 crypto bear market and consequently filed for bankruptcy shortly after rocking the crypto world. After investigations, it was revealed that they made hugely bad investments that either got liquidated or lost hundreds of millions of dollars, eventually leading to its downfall. Full Story Here
- Bankruptcy Date: 2nd of July, 2022
- Funds Lost: $3.5 billion
- Lesson: Don’t use trusted third parties!
Voyager Digital
- Fate: After 3AC (see above) defaulted on a $660 million loan, Voyager Digital used a $75 million revolving loan from Alameda Research to help it stay afloat. This too came crashing down when Alameda, which collapsed due to FTX (see above), also collapsed.
- Bankruptcy Date: 23rd of June, 2022
- Funds Lost: $1.3 billion to 100,000 creditors
- Lesson: Don’t use trusted third parties!
Babel Finance
- Fate: Based in Hong Kong, Babel Finance was a crypto lender that engaged in highly leveraged and risky trading with user funds leading to it losing millions after the price of Bitcoin decreased to the point where they were no longer liquid. Full Story Here
- Bankruptcy Date: June, 2022
- Funds Lost: 8,000 BTC, 56,000 ETH. In total about $280 million
- Lesson: Don’t use trusted third parties!
Blockchain Global / ACX
- Fate: Blockchain Global or BGL owned the firm Australian Crypto Exchange (ACX) which was a crypto trading platform that went bankrupt after collapsing (without any warning or reason) with over $15 million USD in debt. ACX all of a sudden shut down in Feb of 2020 and BGL were then sued by ACX’s investors with hundreds of bitcoins being frozen by the Australian authorities. It was later revealed ACX had used customer funds for business loans and their mismanagement was so bad that they couldn’t even identify which bitcoins were owned by which customers. Full Story Here
- Bankruptcy Date: October, 2021
- Funds Lost: $21 million
- Lesson: Don’t use trusted third parties!
myCryptoWallet
- Fate: Offering “zero-fee” cryptocurrency exchanges this exchange was the quite large in Australia, however it hit several technical issues as well as a dispute with one of the main banks (NAB) resulting in users not being able to withdraw their funds. Full Story Here
- Bankruptcy Date: 12th of October, 2021
- Funds Lost: 30,000 customers and an unknown amount
- Lesson: Don’t use trusted third parties!
FCoin
- Fate: Based in Singapore, FCoin was a crypto exchange that had rapid growth right up until the point where they shut down unexpectedly after failing to pay back their investors to the tune of 13,000 BTC. This was made worse by a massive bank run on their bitcoin reserves. After some questionable moves by the exchange and its own native token FT, it shut down permenantly leaving customer out of luck. Full Story Here
- Bankruptcy Date: February, 2020
- Funds Lost: $130 million
- Lesson: Don’t use trusted third parties!
Cryptopia
- Fate: Based in New Zealand, Cryptopia was a digital asset exchange that got hacked and subsequently collapsed after loosing $16 million. While some believe this “hack” was in fact an exit Scam by the company itself, nothing has been proven. Either way, having so much on hot wallets is a critical flaw that shouldn’t have happened in the first place. Full Story Here
- Bankruptcy Date: 16th of May, 2019
- Funds Lost: $16 million
- Lesson: Don’t use trusted third parties!
Cointed GmbH
- Fate: Due to its complexity and involvement in many fraud cases that spanned much of Europe, Cointed GmbH collapsed in 2017 destroying the savings of tens of thousands of customers.
- Bankruptcy Date: October, 2018
- Funds Lost: 100 million EUR
- Lesson: Don’t use trusted third parties!
BitGrail Srl
- Fate: Due to a hack that stole 17 million NANO (a cryptocurrency) and poor management by the founder, this exchanges funds were seized and the Italian court declared that both it and the founder be forced to declare bankruptcy. Full Story Here
- Bankruptcy Date: 26th of April, 2018
- Funds Lost: 17 million NANO ($170 million)
- Lesson: Don’t use trusted third parties!
Einstein
- Fate: In what seems to be a case of mismanagement and possibly money laundering, Einstein was found to only have $34,000 USD in assets when they owed investors $12 million USD. Full Story Here
- Bankruptcy Date: 5th of November, 2019
- Funds Lost: $200 million from 115,000 customers
- Lesson: Don’t use trusted third parties!
Youbit
- Fate: Due to a hack, the South Korean exchange Youbit lost approximately 17% of its assets. This was after they were previously hacked and as a result, had to shut down. Full Story Here
- Bankruptcy Date: 19th of December, 2017
- Funds Lost: All customers’ assets were marked down to 75% of their value
- Lesson: Don’t use trusted third parties!
QuadrigaCX
- Fate: Due to corruption, mismanagement and a bizarre twist where the co-founder Gerald Cotten, who held the sole crypto keys to the bulk of Quadriga assets died meaning those funds were inaccessible, Quadriga went bankrupt. Later it was revealed they only had $21 million in assets (that they lost) even though they owed creditors $160 million. This left the 76,000 customers of the largest crypto exchange in Canada out in the cold. Full Story Here
- Bankruptcy Date: 8th of April, 2019
- Funds Lost: $190 million USD
- Lesson: Don’t use trusted third parties!
Mt. Gox
- Fate: The very first crypto exchange ever to exist way back in the day, Mt. Gox famously had all its bitcoins stolen via hacking. At a time were 7/10 bitcoin transactions were done on this one exchange alone and hardware wallets didn’t even exist, Mt. Gox was the first lesson that trusting third parties is foolish. After the hack happened, it’s not surprising that they had to completely shut down. Customers are to this day, still dealing with legalities in getting their funds back. Full Story Here
- Bankruptcy Date: 9th of March, 2014
- Funds Lost: ~744,000 BTC ($473 million) from 24,000+ customers
- Lesson: Don’t use trusted third parties!
The Athena Assessment
When a Bitcoin Wallet is “custodial” it means you only have access to your bitcoins if that third party allows you to.
We hope it’s crystal clear by now that exchanges and other third parties (which includes normal banks too) should never be trusted to hold your funds. While not specifically stated in the Bitcoin Whitepaper, the general ethos of Bitcoin is that you should always have custody of your bitcoins and hold your own Private Keys. You should be the only one that holds the private keys as otherwise you have to place your trust in other third parties.
If they think you have done something wrong, don’t like where you want to send your bitcoins, think you have violated their T&Cs, are forced by a government or simply just go bankrupt or get hacked you will lose access to your funds.
Virtually all of these third parties now also force you to prove your identity with highly invasive privacy checks. Furthermore, it can mean it takes much longer to Send Your Bitcoins if you have to wait for their approval. Instead, check our reviewed and rated exchanges so you can pick one that not only is non-KYC and allows you to hold your own funds, but suits you too.
Frankly, if you cannot hold your own keys, then don’t buy any bitcoins. Instead, first go through the 10 Awesome Bitcoin Tips For Beginners steps and you’ll easily get the hang of it. Taking custody of your funds and removing all third parties might seem a bit foreign at first, but it’s a breath of fresh air once you get used to it and is as simple as setting up and sending/receiving email.
FAQ
What Should You Consider When Picking A Bitcoin Wallet?
When choosing your Bitcoin Wallet try to make sure it’s:
– Non-Custodian: Make sure you always have full control of your private keys
– Reputable: Make sure you fully research and vet the wallets reputation and history. There have been many cases of malware disguised as wallets that steal your bitcoins, so do your research carefully before deciding which one to use and trust. This also goes for any hardware wallet devices you use
– Standardised: Make sure it supports the BIP39 standard and is generally not proprietary. Ideally you want it to be open source software that has been vetted by trusted security audits and the bitcoin community over many years
– Verifiable: Make sure it allows you to verify the signature of the manifest files with PGP keys as well as a shasum to confirm the authenticity of the binaries. This ensures that the software files you’re downloading are actually from the developers and haven’t been secretly replaced by hackers. An example of this info can be seen here
– Backup: Make sure it has robust backup and restore capabilities built into it
Are Crypto Exchange Funds Covered Under FDIC?
No. While laws and rules are different for each country and change frequently, there are currently no Crypto Exchanges that have FDIC protections.
