What happens when a crypto exchange freezes withdrawals?

In November 2022, customers of crypto exchange FTX tried to withdraw their money and found they could not. The company was running short of funds, and within days it filed for bankruptcy. People who had trusted the platform to hold their cryptocurrency were left wondering how much they would get back.

The trouble became public on 2 November, when CoinDesk reported on the financial position of Alameda Research, a trading firm closely linked to FTX. Concerns grew over the firms’ finances, and on 6 November Binance announced plans to sell its holdings of FTT, FTX’s own token. Customers began pulling their funds from the exchange. On 8 November, FTX stopped processing withdrawals. Binance briefly considered buying the company but abandoned the deal the next day after reviewing its finances. On 11 November, FTX filed for bankruptcy protection in the United States.

For customers, logging into an account was no longer enough to access their money. They had to wait for the bankruptcy process to determine what the company owed them and how much could be recovered.

Getting money back took years

FTX’s collapse did not mean every customer lost all their money, but recovering funds was a long process. In October 2024, a US bankruptcy court approved a repayment plan. FTX estimated that between $14.7 billion and $16.5 billion in recovered assets would be available for distribution to customers and other creditors.

Repayments began in 2025 and have continued. In July 2026, FTX announced another distribution of about $900 million. Under the bankruptcy plan, cumulative payments reached 105% of allowed claims for certain customer groups and 120% for another group of smaller claims. Those percentages refer to the dollar value of claims accepted in the bankruptcy process. They do not mean customers received the same amount of cryptocurrency they originally deposited.

For example, someone who held one Bitcoin on FTX was not necessarily repaid one Bitcoin. Claims were valued using prices from the time of the bankruptcy in November 2022. If the price of that cryptocurrency later rose, the cash repayment might not be enough to buy back the same amount. FTX’s recovery should not be taken as a promise that customers of other failed exchanges will receive similar repayments. The outcome depends on how much money can be recovered, how many claims are accepted and the legal process involved.

Who controls the crypto in your account?

When you hold cryptocurrency on an exchange, the company generally controls the private keys used to move those assets. You can see your balance, buy and sell crypto and request withdrawals, but you depend on the exchange to process them. If the company stops withdrawals, your funds may remain inaccessible even though your account still displays the same balance.

A self-custody wallet works differently. You control the private keys or recovery phrase needed to authorise transactions. You can move your crypto without asking an exchange for permission, although you may still need a trading platform to convert it into ordinary currency. That control comes with responsibility. If you lose your recovery phrase, you may lose access to your funds permanently. If someone steals it, they may be able to take your cryptocurrency. Sending funds to the wrong address can also be difficult or impossible to reverse. Some people keep the cryptocurrency they need for trading on an exchange and store longer-term holdings in a wallet they control. The choice depends on how comfortable they are managing their own security.

An exchange can be secure and still run out of money

Crypto exchanges use measures such as offline storage, multi-signature approvals and account verification to protect assets. These can help prevent certain attacks, but they cannot guarantee that a company will have enough money available when customers want to withdraw. FTX showed why security is only part of the picture. Customers also need to understand how an exchange manages their assets and whether it can meet its obligations.

Some platforms publish proof-of-reserves reports to show that they hold particular assets. But a report showing assets at a certain time does not necessarily prove that the exchange has enough to cover all its debts. Insurance needs similar scrutiny. A policy may cover certain security breaches but exclude losses caused by fraud or insolvency. Customers should check what is actually covered rather than assume every loss will be reimbursed.

What should you do if withdrawals stop?

If an exchange freezes withdrawals, check its official announcements and save copies of your account statements, transaction histories and deposit records. You may need these documents if the company enters bankruptcy or asks customers to submit claims. Be wary of anyone promising to recover your frozen crypto in exchange for an upfront payment. People who have already lost access to their funds are often targeted by recovery scams.

It is also worth considering these risks before depositing money. Check the exchange’s withdrawal rules, find out how it holds customer assets and avoid keeping more on one platform than you are comfortable leaving there. FTX customers have received repayments, but they had to wait years and go through a formal claims process. They did not simply regain access to their original holdings. That is the difference between seeing cryptocurrency in an exchange account and controlling it yourself. When a platform runs into financial trouble, the balance on your screen does not guarantee that you can withdraw the money.