What happens to your crypto if an exchange goes bust? Lessons from FTX and Celsius

For most people, a crypto exchange feels like a bank account: you log in, see a balance and assume it’s yours. The collapses of 2022 showed how wrong that assumption can be. When a platform fails, whether your crypto is still legally yours can depend on details buried in its terms of use, and getting anything back can take years.

This guide explains what happened at Celsius and FTX, using court and regulator documents, what protections exist today in the US, the UK and Canada, and how to reduce the risk.

Case 1: Celsius, and who owns “Earn” deposits

Celsius filed for bankruptcy on 15 July 2022. One of the first questions the US Bankruptcy Court for the Southern District of New York had to answer was simple to ask and painful to resolve: who owns the crypto customers deposited in its “Earn” accounts?

According to the court’s opinion of 4 January 2023:

• Celsius had about 600,000 Earn accounts, holding crypto worth about $4.2 billion as of 10 July 2022.
• Based on Celsius’s unambiguous terms of use, the court concluded that when crypto, including stablecoins, was deposited in Earn accounts, it became Celsius’s property.
• The crypto still in those accounts on the bankruptcy date became property of the bankruptcy estates.

In plain terms: by agreeing to the terms, Earn customers had transferred ownership of their coins to the company. In the bankruptcy, they became creditors, not owners. The court reserved customers’ other legal arguments for the claims process.

Separately, the Federal Trade Commission later said Celsius had told consumers it was safer than a bank and that deposits could be withdrawn at any time. See crypto lending and earn accounts.

Case 2: FTX, and customer funds that weren’t there

FTX, a large crypto exchange, collapsed in late 2022. On 13 December 2022, the SEC charged its founder, Samuel Bankman-Fried, with defrauding investors. The SEC said that:

• FTX was promoted as a safe, responsible trading platform with sophisticated, automated risk measures to protect customer assets.
• In reality, there was an undisclosed diversion of FTX customers’ funds to Alameda Research, his crypto trading firm, which also received undisclosed special treatment on the platform.

In a parallel criminal case, Bankman-Fried was convicted and sentenced to 25 years in prison. The Department of Justice said he misappropriated billions of dollars of customer funds deposited with FTX.

Case 3: Voyager, and the “FDIC insured” claim

Voyager, a US crypto platform, declared bankruptcy in July 2022. In October 2023, the FTC announced a settlement with the company and sued its former CEO. According to the FTC:

• Voyager’s marketing told customers “YOUR USD IS FDIC INSURED” and that their deposits were “safe”.
• But Voyager wasn’t a bank. Customers’ cash was held in an account at a partner bank, and FDIC insurance only protected it if that bank failed, not if Voyager did. Crypto wasn’t protected at all.
• Voyager froze customers’ accounts two weeks after its CEO had reassured them that their funds were “as safe with us as at a bank”. Consumers lost more than $1 billion in crypto.

The settlement permanently banned Voyager from handling consumers’ assets, with a $1.65 billion judgment suspended so that its remaining assets could go back to customers through the bankruptcy. In June 2025, the former CEO agreed to pay $2.8 million and to a ban on marketing or selling retail crypto products, in a proposed order filed for court approval.

The lesson: a platform saying “FDIC insured” doesn’t mean your crypto is insured. See is your crypto insured?

How claims work in a US bankruptcy

When a crypto platform enters bankruptcy, customers usually have to file a claim and wait for a court-approved plan. Two points from the cases above are worth knowing:

• Ownership comes first. As the Celsius ruling shows, if the terms of use transferred your coins to the platform, you’re a creditor with a claim, not the owner of specific coins.
• Claims are measured in dollars. Under the US Bankruptcy Code, when a claim is disputed, the court determines its amount in US dollars as of the date the bankruptcy petition was filed. So a claim for crypto can be fixed at the prices on the filing date, and you may not benefit if prices rise afterwards. How each case values and pays crypto claims depends on its plan.

Why customers are exposed

Both cases show the same structural risk. When you leave crypto on a platform:

• The platform holds the keys, so you depend on it to keep your assets safe and available.
• What you own depends on the terms of use: some platforms hold assets for you; others, especially for yield products, may take ownership or the right to use them.
• If the platform is insolvent, your claim may be one among many, decided in court proceedings that can take years.
• Deposit insurance doesn’t apply. The FDIC says it doesn’t protect against the failure of crypto exchanges, custodians or wallet providers. See is your crypto insured?

What protections exist now

Canada

After the 2022 failures, the Canadian Securities Administrators strengthened the undertakings that crypto trading platforms give while seeking registration. Under CSA Staff Notice 21-332, platforms commit to hold clients’ crypto in trust and separate from their own assets, not to pledge, re-hypothecate or otherwise use it, and not to offer margin, credit or leverage.

United Kingdom

Under the FCA’s new cryptoasset regime, which comes into force on 25 October 2027, the FCA is applying a dedicated set of client asset rules (CASS 17) to client cryptoassets, with protections around ownership rights, record-keeping, reconciliation and private key management. Until then, check that any firm you use is registered with the FCA. See how to check if an exchange is registered.

United States

Exchanges must register with FinCEN and hold state licenses, but there’s no deposit insurance for crypto. Reading the platform’s terms, and avoiding products that hand over ownership of your coins, is up to you.

How to protect yourself

1. Use regulated platforms where you live, and check the register yourself.
2. Read the custody terms. Look for whether your assets are held for you, segregated, and not lent or reused. Be especially careful with “earn” and yield products.
3. Don’t treat an exchange as a savings account. Keep there only what you’re actively trading.
4. Consider self-custody for long-term holdings, in a wallet whose keys you control. See hot vs cold wallets and seed phrase security.
5. Spread the risk if you do keep larger amounts on platforms.
6. Export your records regularly, so you can prove what you held if a platform disappears.
7. Don’t rely on proof-of-reserves reports. See proof of reserves explained.

If a platform you use runs into trouble, beware of the follow-up scams: people offering to recover your funds or buy your claim. See crypto recovery scams.