Following the Money: Inside Cryptocurrency Exchange Bankruptcy Investigations
The Evidence, the Legal Battles and the Outcomes
Manuscript Date: 1 September 2026
Published Date: 23 October 2026
Last Updated: 23 October 2026
Greetings, beautiful people. 😊☕
Historical coverage: 2020–2024, with relevant subsequent developments through 16 October 2026.
Editorial Note — Research Scope and Cutoff Date: This article examines selected cryptocurrency exchange bankruptcies, insolvencies and related digital-asset company investigations associated with the 2020–2024 period. Subsequent legal proceedings and recovery developments are included where supported by the official records identified below. Some cases concern related businesses rather than conventional cryptocurrency exchanges; these are clearly identified. Allegations, charges, regulatory findings, court judgments and creditor distributions are distinguished wherever material. Legal proceedings and recovery arrangements may continue beyond the stated cutoff date.
Imagine checking your cryptocurrency account one morning, coffee in hand, expecting to see your usual balance.
Instead, you discover that withdrawals have been suspended, customer support is unusually quiet, and the latest company announcement contains several paragraphs of legal language.
Suddenly, that perfectly ordinary cup of coffee has become rather more interesting.
When a cryptocurrency exchange or digital-asset company gets into financial trouble, customers naturally want answers.
Where did the money go?
Who is investigating?
Was there fraud,
a cybersecurity incident,
poor business management,
or simply more debt than the company could handle?
And, perhaps most importantly, will customers recover their assets?
These questions cannot always be answered by reading the company’s announcement alone.
Investigations may involve police, financial regulators, bankruptcy courts, liquidators, insolvency practitioners and civil litigants. Each has a different role. Some investigate possible criminal offences; others examine compliance with financial regulations, recover assets or determine how creditors should be paid.
And here is an important distinction: a company entering bankruptcy does not automatically mean that fraud occurred.
Likewise, an investigation or criminal charge does not, by itself, establish guilt.
This article examines selected cases involving FTX, Mine Digital, Zipmex, Blockchain Global and ACX, Cryptopia, QuadrigaCX, and several related digital-asset businesses. We will look at who investigated them, what the evidence established, which questions remained unresolved, and what the outcomes mean for cryptocurrency users.
Our aim is not to turn every corporate collapse into a detective novel. It is to understand what the available evidence actually tells us.
#H2> 🧭 1. Understanding the Different Types of Investigation
Before examining individual cases, it helps to understand the legal processes involved. The word investigation is often used as though every authority is doing the same job. In practice, several distinct processes may run alongside one another.
#H3> ⚖️ Criminal investigations and prosecutions
Police and prosecutors investigate suspected criminal conduct, such as fraud, theft, money laundering or the deliberate misuse of customer funds.
Investigators collect evidence, interview witnesses, examine financial records and trace transactions. Prosecutors then decide whether to bring charges under the applicable legal system.
A charge is an allegation that must be resolved through the legal process. A conviction, by contrast, follows a guilty plea or a finding of guilt at trial. The precise procedural rules vary by jurisdiction.
#H3> 🏛️ Civil litigation and regulatory enforcement
Financial regulators may investigate whether a company or its officers breached securities laws, licensing requirements, customer-asset rules or other regulatory obligations.
Civil proceedings may seek penalties, injunctions, compensation, repayment or other remedies. Some matters end in a contested judgment; others conclude through a settlement or consent order.
A settlement does not necessarily mean that every allegation in the original complaint has been proven. The terms of the settlement and the court’s order matter.
#H3> 📑 Bankruptcy examinations and insolvency proceedings
Bankruptcy courts, administrators, trustees and liquidators focus on a different set of questions.
What assets remain? Which creditors have valid claims? Were assets transferred before the collapse? Can property be recovered? How should available funds be distributed?
An insolvency practitioner may uncover evidence that leads to civil litigation or a criminal referral. However, the insolvency process itself does not establish that an offence occurred.
#H3> 🔄 Restructuring and creditor recovery
Some financially distressed companies reorganise their debts and continue operating. Others enter liquidation, where assets are realised and distributed according to the relevant legal rules.
A restructuring can reduce debt without involving criminal misconduct. Equally, a company may face criminal proceedings even while its bankruptcy estate is being administered.
Think of these processes as different departments handling different parts of the same complicated matter. They may share information, but they do not all answer the same question.
#H2> 📋 2. Selected Cases at a Glance
The following table provides an overview of the cases discussed in this article. It deliberately separates conventional exchanges from related businesses.
Company or platform | Main jurisdiction | Principal authority or process | What the record establishes |
|---|---|---|---|
FTX and Alameda Research | United States and international operations | US Department of Justice (DOJ), criminal courts, SEC, CFTC and bankruptcy court | Sam Bankman-Fried was convicted and sentenced to 25 years in prison. His later petition for US Supreme Court review remained pending at the cutoff. |
Mine Digital / ACCE Australia | Australia | Australian Securities and Investments Commission (ASIC), criminal courts and insolvency practitioners | A former chief executive faced a fraud charge relating to an allegedly undelivered Bitcoin transaction. The cited court record showed a pending proceeding, not a final verdict. |
Zipmex | Thailand, Singapore and regional operations | Thai SEC, Singapore courts and insolvency practitioners | Thailand revoked the company’s digital-asset business licences effective 28 May 2024. Separate insolvency proceedings and criminal complaints must be considered independently. |
Blockchain Global / ACX | Australia | ASIC, liquidators and Australian courts | Liquidators reported substantial unsecured creditor claims, including claims by former ACX customers. Civil and related criminal proceedings require separate treatment. |
Cryptopia | New Zealand | New Zealand courts, police and liquidators | A 2019 cyberattack was followed by lengthy liquidation and customer-asset recovery proceedings. Distributions continued to require legal and administrative work. |
QuadrigaCX | Canada | Ontario Securities Commission (OSC), courts and bankruptcy trustee | The OSC staff investigation concluded that founder Gerald Cotten had misappropriated customer assets and concealed losses. The report was not a criminal conviction. |
Hodlnaut | Singapore | Singapore High Court, judicial managers and liquidators | The company entered insolvency proceedings. A 2026 notice described an interim dividend for admitted unsecured claims. |
Babel Finance | Hong Kong and international operations | Insolvency and restructuring processes, depending on the relevant entity | The withdrawal suspension and liquidity crisis were reported, but a definitive final recovery outcome is not established by the sources identified for this article. |
FCoin | China-linked operations and international users | Founder announcements and independent reporting | The founder reported an inability to meet withdrawals. The reported shortfall should not be treated as a final audited loss or judicial finding. |
Genesis Global Capital | United States | Bankruptcy court and SEC | Genesis entered Chapter 11 and agreed to a US$21 million civil penalty and injunction in the Gemini Earn securities-registration case. |
Bittrex | United States and foreign affiliates | SEC and US bankruptcy court | The SEC obtained a final judgment in a registration-related enforcement case. This does not establish that customer-fund theft caused the bankruptcy. |
Cred | United States | DOJ and bankruptcy court | The former CEO and CFO were sentenced in 2025 following guilty pleas to wire-fraud conspiracy. Cred was a crypto lender, not an exchange. |
Core Scientific | United States | Bankruptcy court and restructuring process | The Bitcoin mining company completed its Chapter 11 reorganisation in January 2024. Bankruptcy was used for restructuring, not as a finding of fraud. |
Mirror Trading International (MTI) | South Africa and United States proceedings | CFTC and US federal court | A consent order imposed more than US$1.7 billion in restitution for fraud and related violations. MTI was an investment scheme, not an exchange. |
The cases in this table are not all examples of the same type of corporate failure. Some involved established criminal wrongdoing; others involved regulatory enforcement, financial distress, alleged misconduct or the practical difficulties of recovering assets.
That difference is central to understanding the evidence.
#H2> 🔍 3. FTX: When an Exchange Collapse Became a Criminal Fraud Case
FTX is one of the clearest examples of why investigators must look beyond a company’s public image and examine how customer assets were actually handled.
The exchange filed for Chapter 11 bankruptcy protection in the United States in November 2022. Its collapse affected customers, investors, creditors and other businesses connected to its operations.
FTX was closely associated with Alameda Research, a cryptocurrency trading firm founded by Sam Bankman-Fried. The criminal case concerned the misuse of customer deposits and misleading representations about the handling of funds, rather than simply an unsuccessful trading strategy.
#H3> 🏛️ Who investigated FTX?
Several US authorities became involved, including:
The US Department of Justice, which pursued criminal charges.
The Securities and Exchange Commission (SEC), which brought civil securities-law proceedings.
The Commodity Futures Trading Commission (CFTC), which pursued civil enforcement.
The US bankruptcy court, which supervised the company’s Chapter 11 proceedings.
These authorities were addressing different legal questions. The criminal case examined individual conduct; the regulatory proceedings addressed alleged violations within their respective legal frameworks; and the bankruptcy process dealt with assets, claims and distributions.
#H3> ⚖️ What was established?
On 28 March 2024, the DOJ announced that Bankman-Fried had been sentenced to 25 years in prison after his conviction on multiple fraud-related and other charges.
The DOJ described the case as involving the misappropriation of billions of dollars in FTX customer funds, along with fraud affecting investors and lenders.
The conviction and sentence are established legal outcomes. They should not be confused with allegations involving other individuals or entities associated with the wider FTX group, whose legal responsibility must be assessed separately.
Official source: US Department of Justice — Samuel Bankman-Fried Sentenced to 25 Years in Prison.
#H3> 📅 The later appeal: what happened by October 2026?
The US Supreme Court docket records that Bankman-Fried filed a petition for a writ of certiorari in September 2026, seeking further review following a Second Circuit decision dated 12 June 2026.
On 13 October 2026, the Supreme Court granted a motion extending the government’s response deadline to 16 November 2026.
As of the research cutoff of 16 October 2026, the petition was pending. The docket did not establish that the Supreme Court had accepted the case for full review or overturned the conviction.
Official source: US Supreme Court — Bankman-Fried v. United States, No. 26-349.
This is a useful reminder that a petition, an appeal, an accepted case and a reversed judgment are four different things.
Legal paperwork has its own vocabulary, and it does not always reward anyone who tries to read it at coffee-break speed.
#H3> 💡 What does the FTX case teach us?
FTX demonstrates that an exchange’s financial difficulties and criminal proceedings must be analysed separately.
The bankruptcy case addresses the company’s estate and creditor claims. The criminal case addressed specific conduct by an individual and resulted in a conviction and sentence.
For customers, the broader lesson is that a familiar brand, a polished website or a displayed account balance cannot substitute for understanding custody arrangements, internal controls and the risks of leaving assets with a third party.
#H2> 🇦🇺 4. Mine Digital: An Alleged Undelivered Bitcoin Transaction
Mine Digital operated through ACCE Australia Pty Ltd. The company entered administration in September 2022, and a liquidator was appointed in December 2022.
The case later attracted criminal scrutiny over a transaction involving a customer who allegedly paid A$2.2 million for Bitcoin that was not delivered.
#H3> 🔎 Who investigated the matter?
ASIC announced in October 2024 that former chief executive Grant Colthup had been charged with one count of fraud.
According to ASIC’s account of the allegation, the customer paid for Bitcoin in July 2022 but did not receive it. ASIC alleged that the money was instead used to meet company liabilities or purchase cryptocurrency for other customers.
Those allegations are serious, but the distinction remains important: the announcement of a charge is not a conviction.
Official source: ASIC — Former CEO of Crypto Exchange Mine Digital Charged with Fraud.
#H3> ⚖️ Procedural status at the cutoff
ASIC’s published case updates state that the matter was committed to the Ipswich District Court for trial in March 2026.
An indictment was presented in August, and on 15 September 2026 the matter was adjourned to 24 November 2026.
The 24 November date falls after this article’s cutoff. Accordingly, the cited record did not establish a final trial verdict as of 16 October 2026.
This distinction matters because a failed transaction can arise from different circumstances. The evidence and the court process determine whether the conduct amounts to criminal fraud or something else.
#H3> 💡 What does the case teach us?
Customers should pay attention to more than whether a platform accepts deposits. The ability to execute withdrawals and fulfil transactions is equally important.
A delayed transaction alone does not prove fraud. However, repeated delays, unclear explanations and inconsistent communications are reasons to investigate the situation carefully, preserve account records and avoid increasing exposure merely because a platform promises that everything will soon return to normal.
#H2> 🌏 5. Zipmex: Regulatory Enforcement Across Borders
Zipmex operated across several Asian markets. Its difficulties became apparent in 2022, when it suspended withdrawals from certain services amid financial distress and exposure to troubled counterparties, including Celsius Network and Babel Finance.
Its subsequent problems involved regulatory requirements, customer assets and legal proceedings in more than one jurisdiction.
#H3> 🏛️ What did Thailand’s regulator do?
Thailand’s Securities and Exchange Commission directed Zipmex to rectify deficiencies relating to its financial condition and management arrangements in January 2024.
On 2 February 2024, the regulator ordered a temporary suspension of its digital-asset exchange and brokerage services after the required corrections had not been made.
The Ministry of Finance subsequently revoked the company’s digital-asset business licences, effective 28 May 2024, following the regulator’s recommendation.
The regulator also filed criminal complaints involving allegations against the company’s former chief executive. Those complaints must not be presented as convictions unless a subsequent legal outcome establishes guilt.
Official sources:
#H3> ⚖️ What happened in Singapore?
Zipmex-related proceedings also reached the Singapore High Court.
In Zipmex Pte Ltd v Zipmex Asia Pte Ltd and another and another matter [2024] SGHC 298, the court considered irregularities relating to a creditors’ meeting and set aside the disputed resolutions on the basis of substantive irregularities.
The judgment illustrates the legal complexity that can arise when related companies operate across borders. A brand may appear to customers as one business, while its legal entities, assets, liabilities and creditors are spread across different jurisdictions.
Official source: Singapore High Court — [2024] SGHC 298.
#H3> 💡 What does the Zipmex case teach us?
Regulatory enforcement, criminal complaints and insolvency proceedings are related but separate matters.
The Thai SEC’s actions established that the company faced serious regulatory problems and that its licences were revoked. The Singapore judgment addressed specific insolvency-related questions.
Neither source should be stretched into a claim that every customer shortfall was proven theft or that every allegation had resulted in a criminal conviction.
For users, the case highlights the importance of understanding which legal entity holds their assets, which country’s laws apply and which official process governs any recovery claim.
#H2> 🇦🇺 6. Blockchain Global and ACX: Following the Claims
Blockchain Global was associated with the ACX cryptocurrency exchange. The company’s insolvency and the claims of former ACX customers illustrate why it is important to distinguish an exchange from its parent company.
#H3> 📑 What did the liquidators report?
ASIC reported that liquidators’ material showed approximately A$58.65 million in unsecured creditor claims against Blockchain Global as of 2 October 2023. Approximately A$22.75 million of those claims came from former ACX customers.
These are historical claim figures. They should not automatically be interpreted as final admitted liabilities or amounts that customers will receive.
Official source: ASIC — Proceedings Against a Former Blockchain Global Director.
#H3> ⚖️ Civil allegations and later proceedings
ASIC commenced civil proceedings relating to alleged breaches of directors’ duties. In June 2026, ASIC reported that the civil proceeding against a former director had been stayed pending the hearing and final determination of a related prosecution, unless the court ordered otherwise.
A stay is a procedural decision. It is not a finding of guilt or innocence.
The distinction is especially important when a company, its directors and its customers are involved in overlapping proceedings. A claim against a company does not automatically establish personal liability for every director, just as a claim against a director does not resolve every customer’s entitlement.
#H3> 💡 What does the case teach us?
Customer recovery depends on the assets available, the validity and priority of claims, the outcome of legal proceedings and the rules governing distributions.
A reported creditor total is a starting point for understanding the scale of a case—not a receipt confirming that the money has been recovered.
#H2> 🔐 7. Cryptopia: A Cyberattack Followed by Years of Recovery Work
Cryptopia, a New Zealand cryptocurrency exchange, suffered a major cyberattack in January 2019. The incident predates our main 2020–2024 historical period, but the subsequent liquidation and recovery proceedings remained relevant throughout that period and beyond.
This is a different kind of case from FTX. The initiating event was a cybersecurity incident, followed by complex legal questions about the ownership and distribution of exchange-held cryptocurrency.
#H3> ⚖️ Who handled the investigation and recovery?
New Zealand police investigated the cyberattack, while liquidators Grant Thornton worked on the company’s affairs, customer claims and asset distributions.
In March 2020, the New Zealand High Court ruled on the treatment of cryptocurrency held for customers. The legal and administrative work that followed included reconstructing account records, verifying users, reconciling balances and arranging distributions.
These tasks take time because the liquidators must determine not only what assets remain but also which customers are entitled to which assets under the applicable court orders.
#H3> 💰 What was recovered?
In December 2024, Grant Thornton announced that more than 10,000 verified Bitcoin and Dogecoin account holders had received initial distributions. The announcement described more than NZ$400 million in cryptocurrency being transferred on-chain over the preceding 48 hours.
That was a significant distribution milestone. It did not establish that every customer had been fully repaid.
The liquidators continued to report on the process in 2026, including court applications seeking clarification about late or incomplete claims, unclaimed assets and remaining distributions.
Official source: Grant Thornton New Zealand — Cryptopia Liquidation Reports and Updates.
#H3> 💡 What does the case teach us?
A major cyberattack can lead to years of legal and administrative work, even after the immediate technical incident has ended.
It also demonstrates why customers should use official liquidation communications and verified claims portals. A genuine recovery process can attract scammers pretending to be liquidators or offering assistance in exchange for sensitive account information.
When an official process is already complicated, an unofficial helper promising to make everything wonderfully simple deserves careful scrutiny.
#H2> 🇨🇦 8. QuadrigaCX: What a Regulatory Investigation Found
QuadrigaCX is an earlier case included because its investigation produced detailed findings about customer assets, trading activity and the conduct of its founder, Gerald Cotten.
After Cotten died in December 2018, the Canadian exchange became unable to provide customers with access to a substantial portion of the funds they believed they held on the platform.
#H3> 🔎 Who conducted the investigation?
Staff of the Ontario Securities Commission investigated Quadriga’s business operations to understand how the platform was run, what caused its collapse and where customer assets had gone.
The OSC’s report, published in June 2020, described the analysis of platform data, blockchain activity, financial records and information obtained from third parties.
The investigation concluded that Cotten had operated Quadriga as a fraud, misappropriating client assets and concealing losses. The report estimated that customers collectively lost at least C$169 million.
The OSC described approximately C$115 million in losses associated with Cotten’s trading on the platform using fictitious balances and approximately C$28 million in losses from trading customer assets on external platforms without authorisation or disclosure. It also documented the misappropriation of customer assets for personal purposes.
Official source: Ontario Securities Commission — QuadrigaCX: A Review by Staff of the OSC.
#H3> ⚖️ Was this a criminal conviction?
No. The OSC publication was a staff investigation report. The regulator expressly noted that its findings and views were not findings of fact by an OSC hearing panel and had not been tested before the OSC tribunal or a court.
The report is an important regulatory investigation and provides detailed evidence-based conclusions. However, it should not be described as a criminal conviction of Cotten, who died in 2018.
This is an excellent example of why source labels matter. A regulator’s investigation report, a civil judgment and a criminal conviction are not interchangeable documents.
#H3> 💡 What does the case teach us?
QuadrigaCX demonstrates that a balance displayed on an exchange’s website is not independent proof that the corresponding assets are available.
A platform can show numbers on a screen without having sufficient assets to satisfy all customer obligations. The OSC’s findings illustrate how poor controls, misleading representations and the misuse of customer funds can create a severe shortfall.
The practical lesson is simple: customers need to understand who controls their assets and what evidence supports claims about their custody.
#H2> 🏦 9. Hodlnaut: From Judicial Management to Creditor Distributions
Hodlnaut, a Singapore-based digital-asset lending platform, suspended withdrawals in August 2022 amid severe market disruption and exposure to distressed counterparties.
It was a lending business, not a conventional cryptocurrency exchange. It is included because its insolvency demonstrates how losses at one digital-asset company can affect customers who have deposited assets with another.
#H3> 📑 What happened during the insolvency process?
Hodlnaut entered judicial management and was subsequently wound up. These were formal insolvency processes involving the management of the company’s affairs, assets and creditor claims.
The existence of those proceedings does not, by itself, prove that management committed a criminal offence.
#H3> 💰 What did the 2026 dividend notice say?
A dividend notice published in August 2026 described a first interim dividend of 26.92% of admitted unsecured claims, payable from 31 August 2026 onwards.
Official source: Hodlnaut — Updates from the Company’s Liquidators.
The wording matters. The stated rate applied to admitted unsecured claims under the relevant distribution process. It should not be treated as a guarantee that every customer recovered the same percentage of each cryptocurrency originally deposited, nor as proof that the entire process had concluded.
#H3> 💡 What does the case teach us?
When a company announces a recovery percentage, ask what the percentage measures.
Does it refer to an admitted claim, a declared dividend, cash actually paid, the value of assets recovered or an estimated final recovery?
Those measurements can differ substantially. A recovery announcement deserves a careful read, even when the headline figure looks encouraging.
#H2> 🌐 10. Babel Finance: When the Public Record Leaves Questions Open
Babel Finance, a cryptocurrency lending and financial-services business, suspended withdrawals in June 2022 during the wider market downturn and turmoil among digital-asset counterparties.
Its case is relevant to understanding the 2022 liquidity crisis, but the available records identified for this article do not establish a sufficiently complete, authoritative final recovery outcome as of 16 October 2026.
The original draft referred to a US$280 million figure and a proposed fundraising effort. Such figures should not be repeated as final, verified liabilities without identifying the underlying court filing, administrator report or other authoritative source that supports the precise claim.
A reported shortfall may refer to a particular portfolio, an estimate of obligations or a figure disclosed at one point in time. It is not necessarily the same as a final court-verified liability.
This is an appropriate place to acknowledge a limitation rather than fill it with a confident-sounding number.
#H3> 💡 What does the case teach us?
Early reports during a financial crisis can be incomplete. The information available at the beginning of a collapse may change as assets are identified, liabilities are reconciled and legal proceedings develop.
Readers should therefore distinguish between an initial announcement, a documented claim, a formal finding and a final recovery outcome.
Sometimes the most responsible answer is that the available evidence does not yet support a definitive conclusion.
#H2> 🧾 11. FCoin: A Reported Shortfall Is Not a Court Finding
FCoin announced in February 2020 that it could not meet customer withdrawal demands. Its founder, Jian Zhang, attributed the shortfall to accounting and financial problems rather than an external cyberattack.
Contemporary independent reporting cited an estimated deficit of 7,000–13,000 BTC, with the approximate US-dollar value depending on the Bitcoin price at the time.
Those figures originated in the founder’s account and contemporary reporting. They should not be treated as a final audited loss or a judicial finding.
A useful starting point for the contemporary reporting is The Block’s coverage of FCoin’s withdrawal crisis.
#H3> 🔎 What questions remain?
FCoin’s transaction-fee-mining model rewarded users with exchange tokens and helped attract trading activity. The sustainability of that model, the reliability of reported activity and the platform’s ability to meet withdrawal demands were all relevant questions.
However, the founder’s explanation does not establish that no fraud occurred. Equally, a large reported shortfall does not, by itself, prove criminal fraud.
The evidence must support the conclusion, rather than the conclusion being selected first and the evidence invited to catch up later.
#H3> 💡 What does the case teach us?
A company’s own explanation is a source to examine, not automatically a final account of events.
Where an independent audit, court judgment or authoritative insolvency report is unavailable, the uncertainty should remain visible. That may make the story less tidy, but the purpose of research is accuracy—not tidiness at any cost.
#H2> ⚖️ 12. Bittrex: Bankruptcy and Regulatory Enforcement Are Different Questions
Bittrex announced that it would wind down its US operations and filed for Chapter 11 bankruptcy protection in May 2023.
Before the bankruptcy filing, the SEC had brought an enforcement action alleging that Bittrex operated as an unregistered exchange, broker and clearing agency in connection with crypto assets the regulator alleged were securities.
#H3> 🏛️ What did the SEC proceeding establish?
In August 2023, the SEC announced that it had obtained a final judgment against Bittrex, its foreign affiliate Bittrex Global GmbH and former chief executive William Shihara in the registration-related case.
The SEC’s official record describes the charges and the resulting judgment. The matter concerned securities-law registration requirements; it should not be presented as a finding that theft caused Bittrex’s bankruptcy.
Official source: SEC — Final Judgment Against Bittrex and Related Parties.
#H3> 💡 What does the case teach us?
Regulatory enforcement and insolvency can occur at the same time without being the same proceeding.
One process may concern whether a business complied with regulatory requirements; another concerns how its debts and assets are handled. A careful account must explain what each proceeding decided rather than blending them into one broad claim of wrongdoing.
#H2>🪙13. Genesis Global Capital: Lending, Counterparty Exposure and the SEC
Genesis Global Capital and affiliated entities filed for Chapter 11 bankruptcy protection on 19 January 2023.
The company operated in the digital-asset lending sector and was affected by the broader turmoil involving distressed counterparties and the collapse of FTX. Its difficulties also affected customers who had supplied assets through Gemini Earn, a programme in which Gemini customers’ assets were lent to Genesis.
#H3> ⚖️ What did the SEC do?
On 19 March 2024, the SEC announced that Genesis had agreed to a US$21 million civil penalty and a permanent injunction to settle charges relating to the unregistered offer and sale of securities through Gemini Earn.
The SEC stated that Genesis had held approximately US$900 million in crypto assets from 340,000 Gemini Earn investors when withdrawals became inaccessible.
Under the settlement terms, the SEC would not receive the penalty until after other allowed bankruptcy claims, including those of retail Gemini Earn investors, had been paid.
Official source: SEC — Genesis Agrees to Pay a US$21 Million Penalty.
#H3> 📌 What was established—and what was not?
The settlement and injunction are documented legal outcomes. Genesis consented to the judgment without admitting or denying the allegations, subject to the terms of the court order.
The SEC proceeding was a civil securities-registration case, not a criminal conviction for fraud. It should not be treated as proof that every loss associated with Genesis or every aspect of the bankruptcy arose from criminal misconduct.
#H3> 💡 What does the case teach us?
A product that allows customers to earn returns on cryptocurrency may expose them to lending and counterparty risks that are different from simply holding assets in custody.
Customers should understand whether their assets are held for safekeeping, lent to third parties or otherwise deployed.
They should also understand what contractual claim they may have if the service provider becomes insolvent.
The promised return is only one part of the story. The risks behind that return matter too.
#H2> 🏢 14. Cred: A Crypto Lender With Criminal Proceedings
Cred was a financial-services business serving holders of cryptocurrency and other assets. It filed for Chapter 11 bankruptcy protection in November 2020.
It was not a conventional cryptocurrency exchange, but the case is relevant because it demonstrates the legal consequences that can follow misleading representations about a digital-asset business’s financial condition and risks.
#H3> ⚖️ What happened to the executives?
In May 2025, former Cred chief executive Daniel Schatt and former chief financial officer Joseph Podulka pleaded guilty to one count each of wire-fraud conspiracy.
On 29 August 2025, the DOJ announced that Schatt had been sentenced to 52 months in prison and Podulka to 36 months.
The DOJ described the case as involving misleading representations about Cred’s business challenges and risks to customers.
Official source: US Department of Justice — Former Cred CEO and CFO Sentenced.
#H3> 💡 What does the case teach us?
Cred shows why the distinction between an exchange and a lender matters.
A lending platform may deploy customer assets in activities that expose them to defaults, liquidity constraints and other risks. Customers should understand those arrangements rather than assume that deposited cryptocurrency is necessarily being held untouched.
The case also illustrates that the legal consequences of a company’s collapse can continue for years after its initial bankruptcy filing.
#H2> ⛏️ 15. Core Scientific: Bankruptcy as a Restructuring Tool
Core Scientific was a major publicly traded Bitcoin mining company, rather than a cryptocurrency exchange. It filed for Chapter 11 bankruptcy protection in December 2022 amid financial pressure that included debt obligations, energy costs and difficult mining economics.
Its inclusion provides a useful contrast with cases involving alleged misuse of customer deposits.
#H3> 🔄 What was the outcome?
Core Scientific announced in January 2024 that it had completed its reorganisation and emerged from Chapter 11. The restructuring reduced debt by approximately US$400 million through debt-to-equity conversions under its plan.
This was a restructuring milestone, not a finding that the company had committed fraud.
The case demonstrates that bankruptcy can be used to reorganise a financially distressed business. It does not automatically mean that a company stole customer assets or that every creditor has been paid in full.
#H3> 💡 What does the case teach us?
The word bankruptcy describes a legal process, not a complete explanation of why a business got into trouble.
To understand an insolvency, readers must examine the company’s business model, liabilities, available assets and legal proceedings. Otherwise, a mining company’s debt restructuring can be mistakenly lumped together with a custodial exchange’s alleged misuse of customer funds.
That would be rather like comparing a leaky roof with an unpaid mortgage: both can cause serious problems, but they are not the same problem.
#H2> 🌍 16. Mirror Trading International: A Scheme, Not an Exchange
Mirror Trading International (MTI) was a South African investment scheme that solicited Bitcoin from participants. It was not a conventional cryptocurrency exchange.
The case is included as a related digital-asset proceeding because it demonstrates the difference between an exchange, a lending business and an investment scheme that solicits funds.
#H3> ⚖️ What did the CFTC establish?
The US Commodity Futures Trading Commission brought a civil enforcement action in 2022 against MTI and its chief executive, Cornelius Johannes Steynberg.
On 6 September 2023, a US federal court entered a consent order finding MTI liable for fraud and registration violations and requiring more than US$1.7 billion in restitution.
The CFTC described the case as involving nearly 30,000 Bitcoin solicited from at least 23,000 people in the United States.
Official source: CFTC — Federal Court Orders More Than US$1.7 Billion in Restitution for Forex Fraud.
#H3> 💰 Does a restitution order mean customers receive that amount?
No. A restitution order establishes a legal obligation; it does not prove that the same amount is immediately available in cash or recovered assets.
Actual distributions depend on assets located, claims processes, legal priorities and the work of the relevant administrators.
This distinction is particularly important when a headline features a very large restitution figure. The amount ordered and the amount actually recovered can be very different.
#H3> 💡 What does the case teach us?
Before using a cryptocurrency service, identify what it actually does.
An exchange facilitates trading. A lender may lend or otherwise deploy customer assets. An investment scheme solicits funds under a particular investment arrangement. The legal rights and risks can differ substantially.
The business label alone does not tell customers everything they need to know.
#H2> 📊 17. Customer Recovery: What Do the Numbers Really Mean?
Investigations often produce dramatic numbers: billions in alleged losses, millions in recovered assets or a percentage announced for creditor distributions.
Those figures can be useful, but only when their meaning is clear.
Case | Reported milestone | What it means |
|---|---|---|
Cryptopia | More than NZ$400 million in cryptocurrency transferred in a December 2024 distribution involving over 10,000 verified Bitcoin and Dogecoin account holders | A substantial distribution milestone, not proof that every customer was fully repaid. |
Hodlnaut | A first interim dividend of 26.92% of admitted unsecured claims, payable from 31 August 2026 | A stated dividend rate for the relevant admitted claims, not a universal final recovery rate for every customer. |
Core Scientific | Approximately US$400 million in debt reduction through debt-to-equity conversions | A restructuring result, not a cash repayment to exchange customers. |
Genesis Global Capital | A US$21 million SEC civil penalty, with payment deferred behind other allowed bankruptcy claims under the settlement terms | A regulatory penalty subject to a specified priority arrangement, not a customer distribution. |
Blockchain Global / ACX | Approximately A$58.65 million in reported unsecured creditor claims as of 2 October 2023, including about A$22.75 million in claims from former ACX customers | A historical claim total, not a final admitted liability or confirmed repayment amount. |
#H3> 🧮 A simple example of a recovery percentage
Suppose a customer has an admitted claim of US$10,000, and a liquidator declares a distribution of 25% of that claim.
If the distribution is paid in full and the claim qualifies, the corresponding payment would be US$2,500.
But this does not necessarily mean the customer has received 25% of the original cryptocurrency by quantity. The claim may be valued in fiat currency, and the amount may reflect a particular valuation date or legal treatment of the assets.
The market value of cryptocurrency can also change between the date of loss, the date of recovery and the date of distribution.
#H3> 📌 Questions to ask when you see a recovery announcement
Is the figure an estimate, an amount claimed or an amount formally admitted?
Does it describe assets located, assets recovered or money actually distributed?
Is the percentage calculated against a fiat-denominated claim or the quantity of cryptocurrency originally held?
Does the announcement apply to all creditors or only a particular class?
Is the payment proposed, declared, underway or completed?
Does the figure represent an interim distribution or a final outcome?
The key lesson is that assets recovered, claims admitted and money distributed are three different measurements.
A headline may be accurate while still leaving out a distinction that matters greatly to a customer.
#H2> 🛡️ 18. What These Investigations Reveal About Custody and Risk
Although the cases differ, several practical lessons recur.
#H3> 🔑 1. Understand who controls your assets
When customers leave cryptocurrency on a custodial exchange, the platform or its service providers generally control the relevant private keys.
A self-custody wallet gives the user control of the private keys or recovery credentials, depending on the wallet arrangement. This can reduce reliance on an exchange’s continued operation, but it also places responsibility for protecting those credentials on the user.
Neither approach removes every risk. The important questions are who controls the assets, what legal rights the customer has and what happens if a service provider fails.
#H3> 📉 2. Do not confuse an account balance with proof of solvency
A balance displayed on an exchange’s website is a record maintained by the platform. It is not, by itself, independent evidence that the platform holds enough assets to meet every customer obligation.
Proof-of-reserves reports can provide useful information, but their scope matters. A snapshot of selected wallets may not establish the full extent of liabilities, off-chain obligations, related-party exposures or restrictions on assets.
Read what a report actually covers rather than treating a single figure as a universal guarantee.
#H3> 💸 3. Understand what happens when assets are lent out
A custody service, a crypto lender and a yield-generating investment programme can expose customers to different risks.
Before using such a service, consider:
Whether assets are held in custody or lent to third parties.
Whether the business can reuse or pledge the assets.
What restrictions apply to withdrawals.
Whether customers have rights to specific assets or only contractual repayment claims.
Which country’s laws govern the agreement and insolvency process.
Genesis and Cred demonstrate why the distinction between custody and lending deserves attention.
#H3> 🚦 4. Take repeated withdrawal problems seriously
A delayed withdrawal does not prove fraud. It may result from technical difficulties, compliance checks, liquidity pressure or insolvency.
However, repeated restrictions, vague explanations, changing terms and inconsistent statements about customer assets warrant attention.
Preserve transaction records, account statements, relevant communications and the terms that applied to your account.
Avoid increasing exposure solely because a platform promises that withdrawals will resume.
#H3> 🗂️ 5. Keep records that may help establish a claim
If a platform enters insolvency, customers may have to verify their identities, establish account balances and submit claims by a deadline.
Useful records include:
Deposit and withdrawal histories.
Transaction IDs and wallet addresses.
Account statements and balance snapshots.
Relevant terms and conditions.
Official announcements and communications about withdrawal restrictions.
Copies of claim submissions and correspondence with administrators.
Follow the instructions of the official administrator or liquidator and verify the authenticity of any claims portal. Never provide recovery phrases or private keys to someone claiming to help recover assets.
#H2> ⏳ 19. Why Investigations and Recoveries Can Take Years
When a cryptocurrency company stops operating, the legal work rarely ends on the day its website goes offline.
Investigators and insolvency practitioners may need to reconstruct transactions across multiple blockchains, identify assets held by related companies, examine transfers to external platforms and establish who legally owns the property.
Additional complications arise when the company operates through several subsidiaries or when creditors and customers are spread across different countries.
Several processes may run simultaneously:
Asset tracing and preservation: identifying cryptocurrency, fiat balances and other property that may be available for recovery.
Claims assessment: determining which creditors have valid claims and how much each claim is worth.
Civil litigation: pursuing directors, counterparties or other parties over alleged breaches of legal duties.
Criminal proceedings: determining whether individuals committed offences and, where appropriate, imposing sentences.
Distribution: paying creditors or returning assets under the applicable legal priorities and court orders.
These processes have different objectives and timelines.
A criminal conviction does not automatically create enough assets to repay customers. Equally, a company may distribute assets to creditors without a criminal conviction arising from its insolvency.
Cryptopia is a particularly clear illustration: the cyberattack occurred in 2019, but asset reconciliation, ownership questions and distributions continued for years.
And yes, legal proceedings can be slow. Unfortunately, there is no universally available button labelled “Recover Everyone’s Cryptocurrency by Friday”. The work must follow the evidence, the applicable law and the court’s directions.
#H2> 📚 20. Research Limitations and Matters to Watch
A responsible historical article should identify where the available evidence has limits.
The following points are particularly important:
Babel Finance: The US$280 million figure in the original draft requires a specific authoritative filing or administrator report before it can be described as a verified final liability. A definitive final recovery outcome is not established by the sources identified for this article.
FCoin: The reported 7,000–13,000 BTC shortfall originated in the founder’s account of the platform’s difficulties. It should not be described as a final audited loss or judicial finding without further evidence.
Mine Digital: The ASIC record showed the former chief executive’s case was adjourned to 24 November 2026. At the cutoff, the cited record did not establish a final trial verdict.
Blockchain Global / ACX: Creditor claims, civil allegations, criminal proceedings and distributions must be tracked separately. A historical claim total is not the same as a final admitted liability or recovery.
Zipmex: The Thai regulatory actions and Singapore High Court judgment are documented, but the status of each criminal allegation must be assessed independently.
Cryptopia: The liquidation and distribution process continued to require legal and administrative work. A claim that every customer has been fully repaid would require further authoritative support.
FTX: Bankman-Fried’s conviction and sentence were established legal outcomes. The Supreme Court docket showed that further review had been sought, not that the conviction had been overturned.
Hodlnaut: The 26.92% dividend figure related to admitted unsecured claims under a stated distribution process. It should not be presented as a universal final recovery percentage for every customer.
These limitations are not weaknesses to conceal. They help readers distinguish established facts from unresolved questions and make the article easier to update when new judgments, reports and distributions become available.
#H2> ☕ 21. Conclusion: Follow the Evidence, Not Just the Headlines
The investigations examined here show why bankruptcy, fraud, theft, cyberattack and regulatory breach should not be used as interchangeable terms.
FTX became a landmark criminal fraud case, resulting in Sam Bankman-Fried’s conviction and 25-year prison sentence.
The OSC’s investigation of QuadrigaCX documented serious misconduct by its founder, while the report itself was not a criminal conviction.
Mine Digital’s former chief executive faced a fraud charge concerning an allegedly undelivered Bitcoin transaction, with the cited court record showing that the case remained pending at the research cutoff.
Zipmex faced regulatory enforcement and cross-border insolvency proceedings.
Cryptopia’s liquidation demonstrated the complexity of recovering assets after a major cyberattack.
Meanwhile, Core Scientific showed that Chapter 11 can be used to restructure a financially distressed business without itself establishing criminal wrongdoing.
The cases also show that a company’s collapse and its customers’ recovery are separate events. Even where misconduct has been established, repayment depends on available assets, the validity and priority of claims, and the legal rules governing distribution.
For cryptocurrency users, the practical lessons are straightforward:
Understand who controls your assets and what rights you have.
Do not treat displayed account balances or public assurances as proof of solvency.
Learn whether a service holds, lends or otherwise deploys customer assets.
Preserve records and follow official instructions if a company enters insolvency.
Read legal findings and recovery announcements carefully.
Investigations can establish important facts, but their conclusions must be read precisely. Charges are not convictions, estimates are not audited losses, and announced recoveries are not necessarily completed repayments.
If there is one thought worth keeping from this article, it is this: when a cryptocurrency business gets into trouble, follow the evidence, identify the legal process and ask what the reported figures actually mean.
That approach may not make a difficult situation pleasant, but it can help us understand it more clearly—and make better-informed decisions before the next unexpected interruption to our morning coffee.
#H2> 📝 CryptoMatters Editorial Approach
CryptoMatters aims to explain cryptocurrency security, custody and digital-asset risks in a friendly, accessible and evidence-conscious manner.
This article draws on official court records, regulator announcements, insolvency information and other identified sources. It distinguishes between established legal outcomes, allegations, reported estimates and matters for which the available evidence does not establish a definitive result.
The article is educational in nature and is not legal, financial, investment or tax advice. Readers dealing with a specific insolvency, customer claim or legal proceeding should consult the relevant official records and seek appropriate professional advice where necessary.
#H2> 📚 Sources and Further Reading
The following sources provide primary records or official case information for the principal proceedings discussed in this article.
1. United States Department of Justice — Sam Bankman-Fried’s sentence
Read the DOJ announcement, 28 March 2024
Official account of the conviction and 25-year sentence arising from the FTX case.
2. Supreme Court of the United States — Bankman-Fried v. United States, No. 26-349
Official docket showing the September 2026 petition and subsequent procedural entries available by the research cutoff.
3. Australian Securities and Investments Commission — Mine Digital
Official announcement and subsequent procedural updates concerning the fraud charge against the former chief executive.
4. Thai Securities and Exchange Commission — Zipmex licence revocation
Read the Thai SEC announcement
Official explanation of the revocation of Zipmex’s digital-asset exchange and broker licences, effective 28 May 2024.
5. Singapore High Court — Zipmex insolvency proceedings
Read the judgment, [2024] SGHC 298
Court judgment addressing irregularities in a creditors’ meeting and related insolvency matters.
6. ASIC — Blockchain Global and ACX
Read the ASIC proceedings announcement
Official information on the civil proceedings, reported creditor claims and subsequent procedural developments.
7. Grant Thornton New Zealand — Cryptopia liquidation
Read the liquidators’ reports and updates
Official liquidation information covering customer claims, distributions and continuing proceedings.
8. Ontario Securities Commission — QuadrigaCX investigation
Read the OSC investigation report
Detailed regulatory staff review of QuadrigaCX’s operations, customer assets and financial shortfall.
9. Hodlnaut — Liquidators’ updates
Read the August 2026 liquidators’ update
Official update concerning the company’s insolvency and creditor-distribution process.
10. US Securities and Exchange Commission — Genesis Global Capital
Read the SEC announcement, 19 March 2024
Official information about the US$21 million civil penalty, injunction and Gemini Earn securities-registration case.
11. US Securities and Exchange Commission — Bittrex
Read the SEC litigation release
Official record of the registration-related enforcement action and final judgment.
12. US Department of Justice — Cred executives sentenced
Read the DOJ announcement, 29 August 2025
Official announcement of the former CEO’s and CFO’s sentences following their guilty pleas to wire-fraud conspiracy.
13. US Commodity Futures Trading Commission — Mirror Trading International
Read the CFTC announcement, 7 September 2023
Official announcement of the consent order imposing more than US$1.7 billion in restitution.
14. Core Scientific — Chapter 11 restructuring
Visit Core Scientific’s official website
Company information and announcements relating to its restructuring. The specific restructuring milestones discussed in this article should be checked against the relevant company announcements and court records.
15. FCoin — Contemporary reporting
Independent reporting is a starting point for the founder’s February 2020 announcement and the reported withdrawal shortfall. The figures should be treated as reported estimates rather than final judicial findings.
16. Thailand SEC — Zipmex suspension
Read the Thai SEC announcement, 2 February 2024
Official notice concerning the temporary suspension of Zipmex’s digital-asset exchange and brokerage services.
— CryptoMatters ☕
— CryptoMatters
I write about the often-confusing world of crypto, making it easier to understand through practical insights for everyday users. I believe protecting your digital assets shouldn’t require you to understand all the technology behind them.