Mt. Gox to FTX: a writeup of the major crypto custody collapses

We have put together a Rabbit Hole going through the major crypto custody failures from 2014 to 2023, because the same thing keeps happening and the details fade fast.

The short version:

• Mt. Gox (2014): ~850,000 BTC gone. Not a single hack, the coins leaked out over years behind faked balances. Creditors didn't start getting repaid until 2024.
• QuadrigaCX (2018): the founder died and the company said he held the only keys to ~CAD 169M in cold wallets. Auditors later found the wallets had been empty for eight months before he died.
• 2022: Three Arrows Capital (a hedge fund) blew up and took down the lenders that had been funding it with customer deposits: Celsius, Voyager, BlockFi, Genesis. Five collapses in about eight months.
• FTX (2022): ~$8B shortfall, customer money sent to its sister hedge fund, SBF got 25 years. The part I didn't really clock until I dug in: creditors are being made more than 100% whole, but in dollars valued at Nov 2022 prices (~$16k BTC). BTC later passed $90k, so the real recovery in bitcoin terms is a fraction.

In every case the coins were lost because someone else held the keys. The protocol never broke.

I tried to be fair about the other side too. You need exchanges to buy. Lose your seed and there's no bankruptcy court to claw anything back. Some people genuinely should use a regulated custodian. That's all in there.

Every figure is sourced (DOJ, SEC, FTC, the OSC report on Quadriga, the bankruptcy filings).

https://www.learnbitcoin.com/rabbit-hole/mt-gox-ftx-graveyard

Happy to be corrected on any of it!