When FTX filed for bankruptcy on November 11, 2022, it sent shockwaves through the crypto industry, wiping out billions of dollars in market liquidity and shattering confidence in centralized exchanges.
This dramatic collapse marked a turning point for the digital asset industry, prompting calls for greater transparency and regulatory action.
Three years after the exchange collapse, a commitment to transparency has rapidly spread across the crypto industry. Evidence proofs, audits, and on-chain analytics represented progress. Still, many of these reforms are a work in progress, and some of FTX’s creditors have yet to complete them.
CEX will be forced to adjust after FTX
Centralized exchanges were fully impacted by the post-FTX confidence crisis. In the weeks following the bankruptcy, users withdrew more than $20 billion from major trading platforms, according to CoinGecko data.
In response, exchanges began issuing Proof of Margin (PoR) certificates to prove solvency. Binance released its first report on November 10, 2022, and a few days later released a Merkle Tree-based report that allows users to check their Bitcoin (BTC) holdings.
Around that time, OKX, Deribit, and Crypto.com released proof of reserve amid infection fears and uncertainty surrounding crypto exchanges.
While these efforts have provided some visibility into reserves, most have relied on snapshots rather than continuous audits, often drawing criticism from the cryptocurrency community.
David Gokhshtein, one of the X users, said at the time that posting the margin was not enough. “It means nothing if it doesn’t show the company’s debt,” he wrote.
“The hard lessons of the past were never an indictment of cryptocurrencies,” Kraken global economist Thomas Perfumo told Cointelegraph, adding that the FTX debacle reinforced “issues of governance and integrity.”
Decentralized finance protocols have also adapted post-collapse, increasing the demand for not only transparency but also self-custody as an essential safeguard for cryptocurrency users.
“We have seen a noticeable change,” Eddie Chan, president of dYdX Labs, told Cointelegraph. Zhang said DeFi now operates under a stronger risk framework, while “governance is more sophisticated” and has systems that “withstand market shocks.”
Related: FTX’s two-year repayment delay is a ‘victory’, says trader who predicted FTX’s collapse
Creditors still waiting for closure
Despite industry transparency campaigns and recent regulations such as the US GENIUS Act and the European Union’s Crypto Asset Market Regulation, some FTX creditors have yet to recover their losses.
The exchange has so far distributed $7.1 billion to creditors in three rounds, according to a Nov. 9 update from FTX creditor representative Sunil Kavri.
FTX announced in January that it would distribute more than $1.2 billion in repayments to creditors who met certain requirements by January 20. However, Sunil said only $454 million was effectively disbursed in the first round, which went to small claimants with balances of $50,000 or less.
A larger $5 billion payment was made on May 30th, and the latest round took place on September 30th, with an additional $1.6 billion distributed to creditors. The next distribution is scheduled for January 2026, but has not been confirmed by the FTX estate.
FTX’s total recovered assets are estimated to be approximately $16.5 billion as of October 2024.
Kavli said creditors are missing out on market recovery in 2022 and beyond because repayments are made in US dollars rather than physical crypto assets.
Bitcoin, which was worth $16,797 the day after FTX filed for bankruptcy, was trading around $103,000 on Tuesday.
Even if cash repayments exceed the original invoice amount, the effective recovery rate could range from 9% to 46% when adjusted for current crypto prices, Kavri said.
Related: FTX withdraws ‘restricted country’ claim but warns it may re-claim
SBF looks for a lifeline
FTX’s former CEO Sam Bankman Freed, who is serving a 25-year sentence for fraud and conspiracy, appealed his conviction in November 2022, arguing that he was denied the presumption of innocence and was barred from presenting evidence that FTX was in fact solvent. His legal team appeared in the U.S. Court of Appeals for the Second Circuit on November 4.
Prediction market Polymarket currently puts the probability that Bankman Fried will receive a presidential pardon in 2025 at just 4%. Former Alameda Research CEO Caroline Ellison, who cooperated with prosecutors, is expected to begin serving her sentence in late 2024 and be released in mid-2026.
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