Mt. Gox (2014) - 850,000 BTC
Scale: in February 2014, the Japanese exchange Mt. Gox, which handled roughly 70% of global BTC volume, announced the loss of 850,000 BTC (worth about $450 million at the time, more than $50 billion today).
Cause: years of systematic theft from hot wallets, enabled by a bug known as 'transaction malleability' and inadequate security controls. The theft had been going on since 2011, and management failed to notice the shortfall in reserves.
Lesson for the market: the need for reserve audits, separation of hot and cold storage, and Proof of Reserves. The compensation process is still ongoing - creditors only began recovering funds in 2024.
QuadrigaCX (2019) - $190 million
Scale: Canada's largest exchange at the time filed for bankruptcy after the sudden death of CEO Gerald Cotten in India (December 2018). Cotten was reportedly the only person who knew the private keys to the cold wallets.
Cause: after years of investigation it emerged that the cold storage wallets were empty - customer funds had already been moved to other exchanges and used for Cotten's private trading. In effect, a Ponzi scheme.
Lesson for the market: the risk of a 'one-man-shop'. Without multi-signature wallets and third-party audits, the death or disappearance of a single person can bring down the entire exchange.
Celsius Network (2022) - $4.7 billion
Scale: in July 2022 Celsius froze withdrawals, and in August it filed for Chapter 11 bankruptcy. Customers lost access to about $4.7 billion in assets.
Cause: its 'earn' product, promising 10-18% APY, turned out to be funded by risky DeFi loans, deposits with failing funds (Three Arrows Capital), and unsecured leveraged positions. The Terra/Luna collapse in May 2022 triggered a bank run.
Lesson for the market: any 'earn' program offering an APY well above market rates is hiding leverage somewhere. CEO Alex Mashinsky was charged with fraud in 2023.
FTX (2022) - $8 billion shortfall
Scale: on 11 November 2022 the second-largest crypto exchange filed for bankruptcy. The gap between assets and liabilities was about $8 billion. CEO Sam Bankman-Fried (SBF) was sentenced in 2024 to 25 years in prison.
Cause: FTX customer funds were secretly lent to Alameda Research (owned by SBF) and used for risky trading positions and personal purchases (real estate, political donations). When CoinDesk revealed that Alameda's balance sheet was largely backed by the FTT token, a bank run followed within four days.
Lesson for the market: even an exchange with a Super Bowl ad, audits, and regulators on its board can turn out to be a fraud. This is why Proof of Reserves became a requirement (Binance, OKX and Kraken introduced it in December 2022).
Voyager and BlockFi (2022) - $5 billion
Scale: Voyager (July 2022) and BlockFi (November 2022) became side casualties of the collapses of Three Arrows Capital and FTX. Combined liabilities to customers reached about $5 billion.
Cause: both platforms offered locked-term 'earn' products, placing funds in unsecured loans to Three Arrows Capital. Voyager also held capital on FTX at the time of its collapse.
Lesson for the market: the domino effect. The collapse of one large player drags down others who had exposure to it.
Common warning signs
Very high APY on 'earn' / staking products (>15%) - a sign of hidden leverage or a Ponzi scheme. Real ETH staking yields are 3-4%, not 18%.
No Proof of Reserves - if an exchange still doesn't publish a Merkle-tree Proof of Reserves after 2022, treat that as a red flag.
Using its own token as balance-sheet collateral (FTT at FTX, LUNA in Anchor) - if the token's price drops, reserves can vanish within hours.
No license in the EU/US - offshore jurisdictions (Seychelles, Belize) mean no oversight and no compensation process if the exchange collapses.
Rule of thumb: keep on exchanges only the funds you actively trade with. For larger holdings, use self-custody with a hardware wallet.