Three Years Post-FTX Collapse: Industry Rebuilds Trust

Three years after the collapse of FTX on November 11, 2022, the cryptocurrency industry continues to grapple with the aftermath and is focused on rebuilding trust among investors and stakeholders. The dramatic fall of FTX erased billions in market liquidity, deeply shaking confidence in centralized exchanges.

According to Cointelegraph, the industry's response to this crisis has included calls for stronger transparency and regulatory measures. In the wake of FTX's bankruptcy, users withdrew more than $20 billion from major trading platforms, prompting exchanges to adopt proof-of-reserves attestations to demonstrate their solvency.

Binance, for instance, published its first proof-of-reserves report shortly after FTX's collapse, while other exchanges like OKX and Crypto.com followed suit. However, these measures have faced criticism, with some in the crypto community arguing that they do not account for company liabilities, which is vital for true transparency.

Thomas Perfumo, a global economist at Kraken, emphasized that the FTX debacle reinforced the importance of governance and integrity in the industry. Decentralized finance (DeFi) protocols have also adapted by pushing for self-custody as a safeguard for users, reflecting a notable shift in the market dynamics post-FTX.

Eddie Zhang from dYdX Labs pointed out that DeFi now operates under stronger risk frameworks and governance structures that can withstand market shocks. Despite these steps towards rebuilding trust, many of FTX's creditors are still awaiting full restitution.

As of November 2023, the FTX estate has distributed $7.1 billion to creditors over three rounds, but many creditors have yet to be made whole. The next distribution is expected in January 2026, but there are concerns that repayments being made in US dollars rather than cryptocurrencies have caused creditors to miss out on significant market rebounds.

Bitcoin, for instance, has seen a massive increase in value since its low post-FTX, complicating the recovery for creditors who are not receiving in-kind crypto assets. Meanwhile, former FTX CEO Sam Bankman-Fried is currently serving a 25-year prison sentence for fraud and conspiracy, having appealed his conviction.

The legal proceedings surrounding FTX continue to unfold, with creditors still navigating the complexities of their claims and potential recovery rates. As the cryptocurrency industry seeks to regain its footing, the focus remains on transparency and integrity, with the hope of restoring investor confidence and ensuring long-term sustainability in the market.