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Corrupt Crypto Exchanges: How to Protect Yourself

CryptoWhale
CryptoWhale
Ever since Bitcoin was first launched in 2009, swarms of people have flocked to the crypto space to escape the corrupt, greedy, and irresponsible financial institutions that we are all so dependant on.
At first glance, many crypto exchanges are seemingly building bridges that allow us to trade on “decentralized” networks, and have full access to our funds. This is an illusion, and those that have been in the markets for a decent amount of time know this.
Greed is prevalent in most, if not all humans, regardless of their hobbies, work occupation, status, or lifestyle. While crypto exchanges haven’t swindled nearly the same amount of funds as banks, they still try to play by the same non-existent rules.
In this article, I will go over some common exchange schemes, and ways you can protect yourself against the inevitable future exit scams, fake hacks, exchanges outages, or other corrupt tactics.
History of Corrupt Crypto Exchanges
Many newcomers aren’t aware of the extensive history of the actions cryptocurrency exchanges have taken in order to profit at the cost of their users.
Mt. Gox is one of the most well known stories. This Tokyo-based cryptocurrency exchange operated between 2010 and 2014. It was responsible for more than 70% of bitcoin transactions at its peak.
In early February 2014, the exchange suspended withdrawals after claiming to have found suspicious activity in its digital wallets. The news of the suspension resulted in the price of bitcoin plunging by 20%.
The company discovered that it had “lost” more than 850,000 bitcoins, which represented over 6% of bitcoins in circulation at the time.
Quadriga is another cryptocurrency exchange that saw millions of dollars disappear. In 2019, the exchange ceased operations and the company was declared bankrupt with $215.7 million in liabilities and only $28 million in assets.
What was most suspicious was just a month prior to their bankruptcy, Quadriga announced that their CEO, Gerald Cotten, had died from Crohn’s disease while doing volunteer work at an orphanage in India.
His body was never recovered, and many think he’s still alive. Living off the grid with the hundreds of millions he stole. Also, conveniently “volunteering at an orphanage in India” just sounds like a bullshit excuse for people to feel sympathy for him.
Following a 10-month investigation, the OSC released a report stating that the crypto company was indeed a Ponzi scheme.
“Clients entrusted their assets to Quadriga, which provided false assurances that those assets would be safeguarded,” reads the OSC report. “In reality [Gerald Cotton, Quadriga’s co-founder and CEO] spent, traded and used those assets at will.” 
The main lesson from Quadriga, Mt. Gox, and dozens of other events is to avoid leaving your coins on exchanges if you aren’t actively day trading. The saying “not your keys, not your coins” should never be ignored.
KuCoin, Binance, Bitfinex, BitMex, Kraken, CoinCheck, BitGrail, Zaif, NiceHash, BitHumb, and dozens of other exchanges have also been “hacked”. And in the future, I’m sure the list will grow.
Coinbase Charged
Just yesterday, Cryptocurrency-exchange operator Coinbase agreed to pay $6.5 million to settle regulatory claims that it reported misleading information about its trading volumes.
For several months I’ve been warning my followers about CoinBase, and some of the shady tactics they use to milk their users.
CryptoWhale
After doing more research into exchanges uptimes, I've noticed a substandard pattern from #Coinbase.

Their exchange seems to be programmed to go "offline" anytime theres a $500+ move in #Bitcoin's price. Over the last year, Coinbase has gone offline 11 times during larger moves. https://t.co/3fNOU1QuiZ
Banks vs Crypto Exchanges
Like most people reading this, I am not a fan of banks. However, if we are comparing them to crypto exchanges, they are much more trusted.
It’s important to remember that when your funds are held in your bank account, there are things in place that provide you with insurance to cover some losses in case of the banks insolvency.
With exchanges, this doesn’t exist. Most are unregulated, have no headquarters, no public offices, no phone numbers, and most importantly, no insurance protection.
Meaning, if one day they decide to exit scam and use everyones funds to purchase a mega yacht, then sail around the world to escape the law, they can easily do so.
How to Protect Yourself
As of now, roughly 88% of investors have most of their funds on exchanges. This is dangerous because of the growing risks associated with their unregulated, unsafe, and mostly illegal operations.
It’s essential that you look into getting an offline wallet. An offline wallet, also known as cold storage, provides the highest level of security for savings. It involves storing a wallet in a secured place that is not connected to the network. When done properly, it can offer a very good protection against computer vulnerabilities.
Keeping your funds on a Trezor, Ledger, or other safe wallet is recommended for anyone holding lots of funds on exchanges.
Tether Collapse = Exchange Purge?
When Tether eventually disappears, so will liquidity.
Tether’s volume greatly exceeds Bitcoin, and every other cryptocurrency on the market. They are the most popular trading pair ever. Roughly 80% of the market is allegedly purchased with USDT (Without price manipulation, it would probably be 1-5%)
A good question that nobody asks is what happens to exchanges when Tether is eventually shut down?
Binance, FTX, Bittrex, Kraken, Bitfinex and many others are deeply involved in the Tether scheme. My prediction is they will suspend trading, and withdrawals for their customers.
This is why I’ve always said it’s better to get out early, rather then later. If liquidity is gone, and everyone is selling/withdrawing, it’s presumed they will just stop it.
After all, it might be your funds, but when it’s held on these corrupt exchanges, they have full control over it.
They don’t need your permission to move, or manage your funds.
Conclusion
Exchanges are beyond corrupt. Many will pretend they are offered freedom and decentralization by using these exchanges, but it’s just a massive illusion, and marketing ploy.
Not only do they charge significantly higher fees than any bank does, but they offer extreme leverage and encourage gambling. Banks answer to the government, Crypto Exchanges answer to themselves.
I hope this article can motivate some traders to re-allocate their funds to safer wallets, and not fall victim to the inevitable.
Hope everyone has a great weekend! Thanks for reading.
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CryptoWhale
CryptoWhale @cryptowhale

Financial Analyst | Contrarian Investor providing in-depth Crypto + Stock research. Non-Biased/Non-Emotional Trading.

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