When FTX declared bankruptcy on November 11, 2022, it shocked the crypto industry, wiping out billions in market liquidity and undermining trust in centralized exchanges.
This significant collapse marked a pivotal moment for the digital asset sector, prompting widespread demands for enhanced transparency and responses from regulatory bodies.
Three years later, initiatives promoting transparency within the crypto space are on the rise. Proof-of-reserves attestations, audits, and on-chain analytics have emerged as signs of progress. However, many of these reforms are still in development, and some of FTX’s creditors are yet to be fully compensated.
CEXs Adapt Following FTX
Centralized exchanges faced the brunt of the crisis stemming from the FTX fallout. In the weeks after the bankruptcy, users withdrew over $20 billion from major trading platforms, as reported by CoinGecko.
In response, exchanges started to provide proof-of-reserves (PoR) attestations to affirm their solvency. Binance published its initial report on November 10, 2022, shortly followed by a Merkle Tree-based document that allowed users to verify its Bitcoin (BTC) holdings.
During this period, OKX, Deribit, and Crypto.com all released their own proofs-of-reserve amid concerns of contagion and uncertainty surrounding crypto exchanges.
While these measures offered some insight into reserves, most were based on snapshots and not continuous audits, often attracting criticism from the crypto community.
David Gokhshtein, a user on X, remarked that merely releasing proof-of-reserves was insufficient. “If you’re not showing the company’s liabilities, it means nothing,” he stated.
Thomas Perfumo, a global economist at Kraken, mentioned to Cointelegraph that the “hard lessons from the past weren’t an indictment of crypto,” and asserted that the FTX incident emphasized the importance of “governance and integrity.”
Decentralized finance protocols also evolved post-collapse, advocating for transparency alongside self-custody as a vital protection for crypto users.
“We’ve witnessed a significant shift,” Eddie Zhang, president of dYdX Labs, shared with Cointelegraph. He noted that DeFi now operates under improved risk frameworks, and “governance is becoming more sophisticated,” allowing systems to “withstand market shocks.”
Related: FTX’s 2-year repayment delay is a ‘win,’ claims trader who predicted FTX’s collapse
Creditors Await Resolution
Despite ongoing transparency efforts and new regulations such as the GENIUS Act in the U.S. and the European Union’s Markets in Crypto-Assets Regulation, some FTX creditors have yet to recoup their losses.
In a November 9 update from Sunil Kavuri, a representative for FTX creditors, it was reported that the exchange had distributed $7.1 billion to creditors over three rounds to date.
In January, FTX announced over $1.2 billion in repayments for eligible creditors prior to January 20. However, as per Sunil, only $454 million was actually disbursed in the first round to smaller claimants with balances under $50,000.
A larger payout of $5 billion occurred on May 30, and the most recent round on September 30 allocated another $1.6 billion to creditors. The next anticipated distribution is slated for January 2026, although this has not been confirmed by the FTX estate.
As of October 2024, FTX’s total recovered assets were estimated at approximately $16.5 billion.
Kavuri explained that since repayments are being issued in U.S. dollars instead of crypto assets, creditors are missing the opportunity to benefit from the market’s recovery since 2022.
Bitcoin, trading at $16,797 the day after FTX’s bankruptcy filing, was around $103,000 on Tuesday.
Kavuri noted that even with cash repayments surpassing original claim amounts, real recovery rates may vary between 9% and 46% when adjusted for current crypto valuations.
Related: FTX drops ‘restricted countries’ motion but warns it may refile
SBF Seeks a Second Chance
Former FTX CEO Sam Bankman-Fried is currently serving a 25-year prison sentence for fraud and conspiracy but has appealed his conviction, claiming he was denied the presumption of innocence and prevented from presenting evidence that FTX was solvent as of November 2022. His legal team appeared before the U.S. Court of Appeals for the Second Circuit on November 4.
Prediction market Polymarket currently assigns just a 4% chance that Bankman-Fried will receive a presidential pardon in 2025. Caroline Ellison, former CEO of Alameda Research, who cooperated with prosecutors, started her sentence in late 2024 and is expected to be released around mid-2026.
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