FTX

FTX was one of the largest crypto exchanges in the world and collapsed within a few days in November 2022. Like Mt. GoxGlossaryMt. GoxA Japanese Bitcoin exchange that collapsed in February 2014. Around 850,000 BTC were missing; just under 200,000 turned up again. Since July 2024, the trustee has also been repaying creditors in bitcoin; the current deadline is 31 October 2026.On the learning path: Stage 5 · Step 1 – Understanding custody →In the glossary →×, it shows what a balance on an exchange is worth when the provider goes bust.

What happened

On 2 November 2022, CoinDesk reported that FTX’s sister company Alameda Research held around 40% of its assets in FTX’s own token, FTT. Customers withdrew money en masse, and FTX could no longer pay out. On 11 November 2022, FTX, Alameda and more than 100 affiliated companies filed for bankruptcy in the US; around $8 billion was missing.^[1] Founder Sam Bankman-Fried was sentenced to 25 years in prison for fraud in March 2024, and a US appeals court upheld the conviction in June 2026.^[2],[3]

Dollars instead of bitcoin

Claims were valued in US dollars as of the day of the bankruptcy filing, with bitcoin at $16,871.^[1],[4] The plan presented in 2024 gave 98% of creditors 118% of that amount, in cash.^[5] So anyone who held bitcoin on FTX got dollars instead of bitcoin – for comparison, the price today is $85,533.

The lesson

A balance on an exchange is a claim against the provider, not your bitcoin. Under MiCAGlossaryMiCA (Markets in Crypto-Assets Regulation)The EU regulation on markets in crypto-assets. Since 30 December 2024, exchanges, brokers and custodians in the EU have needed authorisation; the last transitional period ended on 1 July 2026. MiCA regulates providers, not Bitcoin itself.On the learning path: Stage 4 · Step 2 – Choosing a provider →In the glossary →×, authorised providers in the EU must now keep client assets separate from their own.^[6] But there is no deposit guaranteeGlossaryDeposit guarantee (deposit protection)Statutory protection for bank deposits: up to €100,000 per person and bank if the bank goes bust. It generally doesn’t cover bitcoin – and neither does investor compensation.On the learning path: Stage 5 · Step 1 – Understanding custody →In the glossary →× for bitcoin like the one for a bank account. When self-custodyGlossarySelf-custodyYou hold the private keys to your bitcoin yourself – in your own wallet rather than with a provider. Nobody can freeze your bitcoin. But nobody can help you if you lose your seed phrase and keys.On the learning path: Stage 5 · Step 1 – Understanding custody →In the glossary →× makes sense is explained in Understanding custody.