The total estimated value of crypto assets held with centralized exchanges:
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Throughout history, financial intermediaries have lied to, cheated, and stolen from their customers. Yet, for some reason, people continue to put their trust in these entities. Although crypto provides a mechanism for self-custody, beginners continue to make the same mistakes by trusting intermediaries with their assets. Let the below timeline serve as a stark reminder: Not your keys, not your crypto.
Mt. Gox
2014
By 2013, just 3 years after launching, Mt. Gox was processing 70% of all Bitcoin trades.
On Feb 7th, 2014, Mt. Gox suspended Bitcoin withdrawals due to “technical problems”.
On Feb 24th, 2014, Mt. Gox suspended all trading and the exchange’s website went offline. That same week, a document was leaked revealing that 744,408 BTC was stolen from customers due to poor security measures and another 100,000 BTC was also missing.
On February 24th, 2014, Mt. Gox filed for bankruptcy.
On March 15th, 2019, Mt. Gox CEO, Mark Karpeles was found guilty of falsifying data to inflate holdings of the exchange.
QuadrigaCX
January 2019
In December of 2018, the CEO of QuadrigaCX, Gerald Cotton, passes away while visiting India.
On January 14th, 2019, Cotten's wife posted an announcement on the QuadrigaCX website announcing his passing. This same week, customers are unable to withdraw their crypto assets from the exchange.
On January 31st, 2019, a notice appears on the website announcing that the exchange is bankrupt and that they are not able to locate the private keys for their wallets.
In 2020, the Ontario Securities Commission reported that Cotten had operated the exchange as a Ponzi Scheme and misappropriated funds to fund his lavish lifestyle. Cotten reportedly personally traded with customer assets, losing approximately $115 million. According to the investigation, Cotten was the sole holder of the private keys associated with the exchange, ensuring that the remaining customer deposits were not recoverable.
Celsius
July 2022
By May of 2022, Celsius had close to $12 billion in assets under management.
Celsius had been using a 3rd party, Prime Trust, to store some customer assets since March 2020. This relationship ended in June 2021, when Prime Trust's risk team expressed concern about Celsius's strategy of "endlessly re-hypothecating assets ... lending the same assets over and over and over again to juice yields".
On June 11th, 2022, Celsius CEO Alex Mashinsky replied to a user on Twitter stating that the user’s claims of frozen withdrawals were “FUD and misinformation.”
Two days later, Celsius announced that it had suspended all withdrawals, swaps, and account transfers due to “extreme market conditions”.
On July 14th, 2022, Celcius filed for bankruptcy. In the filling, it was discovered that the company had $5.5 billion in liabilities and only $4.31 billion in assets.
Voyager Digital
July 2022
On June 17th, 2022, hedge fund Three Arrows Capital announced it had suffered heavy losses due to the collapse of the Terra ecosystem.
On June 22nd, 2022, Voyager disclosed that it had exposure to Three Arrows Capital to the tune of $370 million worth of BTC and $350 million worth of USDC.
On July 1st, 2022, Voyager froze all deposits, withdrawals, and loyalty rewards due to “market conditions”.
On July 7th, 2022, Voyager Digital filed for bankruptcy. In the filing, Voyager estimated that it had more than 100,000 creditors and somewhere between $1 billion and $10 billion in assets, and liabilities worth the same value.
FTX
November 2022
On November 2nd, 2022, CoinDesk published a report claiming that the reserves for Alameda Research, a crypto trading firm owned by Sam Bankman-Fried, were based on FTT, a token created by FTX.
On November 6th, 2022, the CEO of Binance tweeted that he intended to sell Binance's FTT allocation on the open market due to the "recent revelations". The CEO of Alameda Research, Caroline Ellison, responded on twitter, offering to purchase the tokens from Binance at a $22 price point.
On November 7th, Sam Bankman-Fried tweeted, "FTX is fine. Assets are fine."
In the 72 hours leading up to November 8th, FTX experienced $6 billion worth of withdrawals. On the morning of November 8th, FTX froze withdrawals from the platform. Later that day, Binance signed a nonbinding agreement to purchase FTX to help cover the liquidity crunch.
The very next day, on November 9th, Binance backed out of the deal after reviewing the company's structure and books. That same day, SBF told investors that FTX needed emergency funding to cover an $8 billion hole on the balance sheet.
On November 11th, 2022, FTX filed for bankruptcy.
Sam Bankman-Fried was arrested in the Bahamas on December 12th, 2022 for a long list of fraud-related charges.
On November 2nd, 2023, SBF was found guilty on 7 criminal fraud counts, facing a maximum of 115 years in prison.