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What Happened to FTX? What About Mt. GOX? Why Do Crypto Exchanges Fail?

Since Satoshi’s release of Bitcoin in 2009, cryptocurrencies of all origins have earned a reputation online for volatility.

As the years have gone by, various events have caused cryptocurrency exchanges to go bust in spectacular fashion. What is the toll of these failures? As well, what lessons can we take away from the losses? Find out below.

Picture of defunct FTX arena

Background on Crypto Exchanges

Cryptocurrency may be a decentralized market due to the lack of state backing of the currencies, however centralized exchanges serve as an important gateway for users of cryptocurrency.

In the past, some centralized exchanges have had a turbulent history, with many making headlines relating to various scams. By 2018, the number of cryptocurrency exchanges which had failed was 23. By 2020 this figure had ballooned by 269%, making for an estimated total of 67 failed cryptocurrency exchanges. Some exchanges fail more spectacularly than others, with only the most notable exchanges making headlines.

What Causes an Exchange to Fail?

Something common to a number of exchange failures is a lack of transparency. It is typical in business to believe that investors and customers would be spooked by disclosure of certain kinds of events, and thus when these events happen, they go un-communicated. Information that exchange managers may want to avoid disclosing are hacks, lack of liquidity, and the practices going on in the back end of the exchange.

When we look at the exchanges that have continued to stand the test of time, it’s the exchanges that are transparent and working with lawmakers and other relevant stakeholders to conduct the exchange in a way that is compliant with currently existing financial regulations. While the culture in the world of cryptocurrency tends to lean from libertarian to crypto anarchists, the currently existing financial climate is built on a history of fraud, counterfeiting, and infamous scams and we see similar behaviors in the exchanges that lack transparency.

Next we’ll look at some specific examples of crypto exchange failures.

What Happened to Mt Gox?

Right off the bat, the exchange failure everyone knows of, or first hears of, is Mt. Gox. After releasing in 2010, Mt. Gox became the most widely used cryptocurrency exchange platform available in 2014, accounting for more than 70% of Bitcoin transactions at the time.

In February of 2014, Mt. Gox was hacked and BTC 850,000 was stolen. Mt. Gox couldn’t recover from this and ultimately failed as an exchange.

What Happened to FTX?

In more recent events, FTX exchange went bust in November of 2022, with the case still ongoing. FTX’s operations were disrupted by a liquidity crisis. Upon the release of an article about how much of FTX’s associated token (FTT) was held by Sam Bankman-Fried, the owner of FTX, Binance announced they were going to sell their FTT and this sale of FTT caused the price of the token to collapse. In response, FTX closed withdrawals and the liquidity crisis began.

The company also may have shared funds with its sister trading firm Alameda Research but it will be years before we know exactly happened behind the scenes at FTX.

One important distinction with FTX and many of the exchanges mentioned in this article is that they didn’t acquire a license to operate from a strictly regulated environment like the USA.

What Happened to QuadrigaCX?

One of the more scandalous exchange busts to occur, was QuadrigaCX. They were a fast-growing, easy and popular cryptocurrency exchange based out of Canada.

The founder and main operator of the company suddenly died while on a trip to India. The catch is that he died with the keys to the cryptocurrency belonging to the company. Or so the media thought. The plot thickens further, but in the end, Canadians lost about 192 million.

What Happened to Celsius?

Celsius is the classic story of a bank run. The company was running a simple borrowing and lending exchange. Users can deposit their cryptocurrency and earn yield on the amounts while getting access to more appealing rates by purchasing Celsius’ token CEL.

During the market breakdown in 2022, Celsius faced massive withdrawals from the platform causing them to halt withdrawals for customers. While some customers have reported that they were able to get funds out, most have not.

What Happened to BlockFi?

Similar to Celsius, BlockFi faced similar liquidity issues due to their borrowing and lending products for Bitcoin.

BlockFi was poised to provide many different offerings including a credit card with cashback in Bitcoin. They had impressed many in the market, and grew a significant customer base. However, in November of 2022, BlockFi filed for bankruptcy and halted user withdrawals. There have been positive steps to make customer’s hold but there are plenty of people still awaiting their funds.

The List

This is not an exhaustive list but here are some of the other notable crypto exchanges or companies that have failed over the years. Some customers were able to recoup costs where others were left holding the bag. That’s why it’s worth considering a personal crypto wallet.

Here’s the list:

  • Cryptopia (2019)
  • ACX (2020)
  • FCoin (2020)
  • Blockchain Global (2021)
  • Zipmex (2022)
  • Hodlnaut (2022)
  • Babel Finance (2022)
  • Voyager Digital (2022)
  • Core Scientific (2022)
  • Three Arrows (2022)
  • Luna (2022)
  • Alameda Research (2022)
  • Genesis (2023)

Lessons Learned

So what can we take away from the history of failed exchanges? Transparency is key to keeping an exchange alive. Cryptocurrency is a volatile asset that’s very prone to speculation. It is the speculative possibilities that lends itself to lack of transparency, which is part of how even exchanges with a good reputation can come to fail.

When we look at the exchanges that are still standing today, the transparent ones that work with legislators are the ones still remaining. The fiat financial system is built off of decades worth of legal cases and a financial history of frauds and counterfeiting and a wide variety of financial scams. By leaning into the case law, exchanges earn trust and investor confidence.

In addition, in some cases there is no established case law for the field of cryptocurrency. Legislators and cryptocurrency stakeholders must work together to establish a field of legislation that works for all.

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Michael Brown

About the Author

Michael Brown

Michael Brown is the acting Chairman of community based thought collective, Subcultural Research Lab. His interest in Crypto began while studying industrial engineering in Dartmouth, Nova Scotia. His passion lies in geopolitics, social phenomenon, and the exchange of data. You can find Subcultural Research Lab at

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