In November 2021, the abrupt downfall of prominent crypto exchange FTX’s sent shockwaves throughout the digital finance world. Suddenly, FTX CEO and former King of Crypto Sam Bankman-Fried was under criminal investigation and the news media was buzzing with stories about eye-watering losses incurred by the exchange’s clients. A year later, the fallout is still reverberating across the crypto world, triggering crucial discussions about safety within the crypto space and the importance of choosing the right exchange.
“From compromised systems integrity and faulty regulatory oversight abroad, to the concentration of control in the hands of a very small group of inexperienced, unsophisticated, and potentially compromised individuals, this situation is unprecedented,” John J. Ray III, FTX’s new CEO, lamented. John J. Ray III’s statement highlights the often-overlooked aspect of the glamorous world of cryptocurrency trading—the critical importance of the platforms where these trades happen.
Like traditional stock exchanges, cryptocurrency exchanges serve as intermediaries for digital asset transactions, but unlike their well-regulated counterparts, some exchanges lack the well-established protective measures for investors. In fact, crypto exchanges vary greatly in their level of security, liquidity, customer service, and regulatory compliance which can result in wide-ranging consequences as FTX’s spectacular fall from grace shows.
