Customer assets were commingled with an affiliated trading firm. The exchange had been audited, and the audits did not test segregation or liabilities under stress.
The estate later disclosed the exchange held a small fraction of the bitcoin customers believed it held.
An audit is not a custody control. Segregation and legal title determine what a customer actually owns when the entity fails.
These are the custody configurations structurally exposed to this kind of event. It describes the failure class, not any individual holder.
Whether your own arrangement sits in one of those groups is the question our Custody Independence Standard is designed to answer, and the four questions in Is your custody setup actually safe? walk through it.
Chapter 11 filings, CFTC complaint
Figures are as reported by the named sources. Proof of Custody has not independently reproduced the underlying analysis.
Proof of Custody, "FTX" incident record, proofofcustody.io/incidents/ftx-2022Customer assets were commingled with an affiliated trading firm. The exchange had been audited, and the audits did not test segregation or liabilities under stress. Reported loss: ~$8B customer shortfall.
An audit is not a custody control. Segregation and legal title determine what a customer actually owns when the entity fails.
This class of failure could reach: bitcoin left on an exchange; bitcoin lent or earning yield. It describes the failure class rather than any individual holder.