The cryptocurrency exchange is a vital gateway for investors to purchase digital assets like Bitcoin and Ethereum. However, over the past 15 years of crypto development, numerous platforms have collapsed due to crypto winters, severe hacker attacks, fraud, or mismanagement, leading to significant user fund losses.
While the crypto market remains highly volatile, understanding these failed exchanges and their causes provides clearer insights into selecting reliable platforms and protecting your assets.
This article reviews major historical cryptocurrency exchange bankruptcies and offers practical advice for choosing a secure trading venue.
Top 10 Cryptocurrency Exchange Bankruptcies
Numerous cryptocurrency exchanges shut down annually due to operational failures. Below are ten of the most notable cases.
Genesis (Bankruptcy Date: January 2023)
Founded in 2013, Genesis was the first U.S. Bitcoin over-the-counter trading platform. It grew into one of the largest comprehensive service providers in the crypto market, offering derivatives trading, lending, and custody services.
On January 19, 2023, Genesis filed for Chapter 11 bankruptcy in Manhattan court. The collapse followed a $1 billion exposure to the FTX meltdown in November 2022, which led to a liquidity crisis. After failing to secure external investment, the exchange halted withdrawals and ultimately declared bankruptcy.
FTX (Bankruptcy Date: November 2022)
The bankruptcy of FTX, once a top-three cryptocurrency exchange, was a defining event of 2022. On November 11, 2022, FTX filed for Chapter 11 bankruptcy in the U.S.
The downfall began with reports that Alameda Research, closely tied to FTX, held $8 billion in liabilities—primarily in FTT, FTX’s native token. This triggered a sell-off by Binance, leading to a bank run. Investigations revealed that FTX had misused customer funds for high-risk bets at Alameda, which suffered massive losses.
FTX has since recovered over $7 billion in assets to repay customers and abandoned restart plans.
BlockFi (Bankruptcy Date: November 2022)
BlockFi, launched in 2017, aimed to "redefine banking" with interest-bearing accounts and crypto credit cards. However, the 2022 crypto market crash—which saw Bitcoin drop from $68,000 to under $16,000—exposed vulnerabilities.
After the failure of Three Arrows Capital (3AC), BlockFi faced severe strain. Despite an FTX bailout, FTX’s collapse forced BlockFi to suspend withdrawals and file for bankruptcy on November 28, 2022, laying off most of its staff.
Three Arrows Capital (3AC) (Bankruptcy Date: July 2022)
Three Arrows Capital was a major crypto hedge fund managing nearly $10 billion in assets. It collapsed in July 2022 due to a liquidity crisis sparked by the bear market.
3AC had heavily invested in the failed TerraUSD (UST) stablecoin project, losing around $500 million. It also held leveraged positions in DeFi protocols that were liquidated as BTC and ETH prices fell. The fund defaulted on $3.5 billion in loans from lenders like Voyager Digital and Genesis.
Voyager Digital (Bankruptcy Date: July 2022)
Voyager Digital, a U.S.-based crypto exchange, filed for bankruptcy after 3AC defaulted on a $660 million loan. The platform initially paused withdrawals but assured users of continued operations.
Alameda Research offered a $75 million credit line, but Voyager’s hopes of recovering the 3AC debt dimmed as the hedge fund filed for bankruptcy. A planned acquisition by Binance.US was ultimately blocked by U.S. regulators.
Celsius (Bankruptcy Date: June 2022)
Celsius was a crypto lending and staking platform that filed for bankruptcy due to a liquidity crisis during the 2022 bear market. The Terra-LUNA crash exacerbated its situation.
The company held leveraged positions in DeFi protocols that were liquidated and admitted to a $1.2 billion deficit on its balance sheet. In early 2024, Celsius ended bankruptcy proceedings, announcing it would pay creditors over $3 billion and issue shares in a new mining business.
Blockchain Global (Bankruptcy Date: November 2021)
Blockchain Global (BGL), parent company of the Australian Crypto Exchange (ACX), collapsed in November 2021 with debts exceeding $15 million. ACX suddenly shut down in February 2020, leading to lawsuits from 94 investors. A court freeze was placed on 117.33 BTC, and BGL subsequently entered voluntary administration.
FCoin (Bankruptcy Date: February 2020)
FCoin, a Singapore-based exchange, abruptly closed in February 2020 without explanation, failing to pay investors 13,000 BTC (worth about $125 million at the time). The platform had initially seen rapid growth, with volumes surpassing Huobi, OKEx, and Binance combined, but a July 2018 outflow of 10,000 BTC triggered a downward spiral.
Quadriga (Bankruptcy Date: 2019)
Quadriga’s bankruptcy highlighted the risks of centralized exchange control. Founder Gerald Cotten held the sole keys to cold wallets storing customer funds and allegedly used them for personal trading. After his death, investigators could not trace the money. Another co-founder had a history of identity theft convictions.
Mt. Gox (Bankruptcy Date: 2014)
Mt. Gox, once handling over 70% of global Bitcoin trading, collapsed in 2014 after a hack resulted in the loss of 850,000 BTC. Although 200,000 BTC were later recovered, most investor funds remain unrecovered. The event remains one of the largest crypto exchange failures in history.
Why Do Cryptocurrency Exchanges Fail?
From the cases above, exchange failures generally stem from internal mismanagement or external factors like market volatility.
External Factors
Market Volatility
Prolonged bear markets, like that of 2022, reduce trading volumes and strain exchange liquidity. Platforms using customer funds for high-risk investments can face insolvency when prices fall sharply.
Regulatory Pressure
Stricter regulations following major exchange collapses have created operational challenges. Even large exchanges like Binance have faced significant legal pressure, leading to leadership changes and restructuring.
Hacker Attacks
Inadequate security measures make exchanges targets for hackers. Major thefts can disrupt operations and lead to insolvency, as seen with Mt. Gox.
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Internal Factors
Mismanagement
Poor operational controls and misuse of customer funds were central to the failures of FTX and Quadriga. Lack of transparency and risk management often leads to collapse.
Fraud
Some exchanges lure users with promises of high returns and low risk, only to vanish with investor funds. These scams highlight the importance of due diligence.
How to Choose a Reliable Cryptocurrency Exchange
Selecting a secure exchange is critical for protecting your assets. Consider these factors:
Reliability
Choose established exchanges with a long track record. Check domain registration dates and look for user reviews to assess reputation.
Security
Verify regulatory licenses, security protocols, and fund storage practices. Platforms that segregate user assets in cold wallets offer better protection.
Cost
Compare trading, deposit, and withdrawal fees across exchanges. Lower costs can significantly impact long-term returns.
Supported Cryptocurrencies
Ensure the exchange offers the assets you wish to trade. While most support Bitcoin and Ethereum, altcoin availability varies.
Trading Depth
High trading depth ensures large orders can be executed without significant price slippage, reducing trading costs.
User Experience
A intuitive interface and responsive customer support improve the trading experience. Look for platforms offering native language support.
Deposit Methods
Exchanges supporting fiat currency deposits (like TWD) simplify the process for beginners.
How to Protect Your Assets in Cryptocurrency Trading
Beyond selecting a reputable exchange, adopt these practices to safeguard your investments:
- Avoid storing a high proportion of assets on any single exchange. Use cold wallets for long-term storage.
- Withdraw unused funds to personal wallets regularly instead of leaving them on exchanges.
- Be wary of high-yield staking programs, which often carry hidden risks and potential liquidity issues.
Frequently Asked Questions
What was the largest cryptocurrency exchange bankruptcy?
Mt. Gox's 2014 collapse was historically the largest, but FTX's 2022 bankruptcy involved greater financial complexity and broader market impact.
Can users recover funds after an exchange bankruptcy?
Recovery depends on legal proceedings and asset recovery efforts. Some users have received partial repayments years later, but full recovery is rare.
How can I verify an exchange's security?
Check for regulatory licenses, independent audits, cold wallet usage, and transparency reports. Community feedback and historical incident records also provide insights.
Are decentralized exchanges (DEXs) safer than centralized exchanges (CEXs)?
DEXs reduce custody risks by allowing users to retain control of funds, but they may have lower liquidity and different smart contract risks compared to established CEXs.
What red flags indicate a problematic exchange?
Promises of guaranteed returns, lack of regulatory compliance, poor transparency, and frequent technical issues are common warning signs.
How important is insurance for cryptocurrency exchanges?
Insurance funds can protect against hacking incidents, but coverage varies. Verify whether an exchange offers any insurance protection for user assets.