In the fast-evolving world of cryptocurrency, high-profile exchange hacks and catastrophic mismanagement have shown that security is paramount. From the shocking FTX collapse to the record-breaking Bybit hack, billions of dollars have been lost due to compromised wallets, human error, and flawed controls. In this post, you’ll learn about five of the most significant crypto exchange incidents, how they unfolded, and why solutions like Vaultody’s MPC-based custody and hardware enclaves could have prevented these massive breaches. Whether you’re a business leader managing cryptocurrency or a developer building blockchain applications, this article will help you understand the critical importance of airtight custody and security protocols.

FTX Collapse (2022)

Once hailed as one of the largest and most trusted cryptocurrency exchanges, FTX became a cautionary tale when it collapsed in 2022. Allegations of fraud, mismanagement of customer funds, and a lack of internal controls resulted in billions of dollars going missing almost overnight.

• What Happened: FTX reportedly used customer deposits for trading and high-risk activities. When word got out, a run on the exchange revealed that FTX did not have enough liquidity to meet withdrawal requests.
• Result: The exchange filed for bankruptcy, leaving countless retail and institutional investors in limbo. Industry trust was severely damaged, prompting regulators worldwide to propose stricter rules.

While not a “hack” in the traditional sense, the FTX meltdown underscores how inadequate oversight and controls can be just as devastating as direct cyberattacks.

Mt. Gox Hack (2011–2014)

The Mt. Gox hack remains one of the most infamous crypto incidents in history. At its peak, Mt. Gox handled approximately 70% of all Bitcoin transactions worldwide.

• What Happened: Between 2011 and 2014, hackers repeatedly exploited security vulnerabilities, eventually stealing about 650,000 BTC (worth hundreds of millions at that time and much more today).
• Result: The exchange declared bankruptcy, and countless users were left without their funds. This hack served as a wake-up call to the crypto community, highlighting the need for better exchange security, robust wallet management, and transparent operations.

Bybit Hack (2025)

In a record-breaking event, Bybit faced a catastrophic breach in 2025. Attackers took advantage of vulnerabilities during a routine cold-to-warm wallet transfer, managing to steal an estimated $1.5 billion in cryptocurrencies.

• What Happened: The transfer process used to move funds from cold storage to a more accessible “warm wallet” had exploitable flaws. Attackers leveraged social engineering and technical weaknesses to intercept these funds in real-time.
• Result: This hack set a new precedent for the scale of cyber theft in the crypto space. Although Bybit took steps to compensate affected users and enhance its security framework, the incident emphasized the persistent risk of significant losses from single points of failure.

Coincheck Hack (2018)

Coincheck, a major Japanese crypto exchange, lost approximately $530 million worth of NEM tokens in 2018.

• What Happened: Hackers targeted a hot wallet containing NEM tokens, taking advantage of lax security measures such as the lack of multi-signature wallets.
• Result: Coincheck struggled to reimburse affected users and faced intense scrutiny from regulators. The hack spotlighted the dangers of keeping large sums in hot wallets without comprehensive controls and approvals.

KuCoin Hack (2020)

In 2020, the Singapore-based exchange KuCoin was compromised when hackers gained access to its hot wallets, stealing around $281 million in Bitcoin, Ethereum, and various ERC-20 tokens.

• What Happened: The attackers exploited a vulnerability in KuCoin’s internal infrastructure that allowed unauthorized withdrawals from hot wallets.
• Result: A significant portion of the stolen assets was later tracked and recovered, in part due to cooperation from other exchanges and blockchain platforms. Nonetheless, the breach highlighted that even large, well-known exchanges are not immune to internal vulnerabilities and sophisticated attacks.

How Vaultody Could Have Prevented These Incidents

While these five exchange incidents differed in execution and scope, they share a common thread: a breakdown of security and trust. At Vaultody we believe robust custody solutions can mitigate and even eliminate such risks. Our platform combines Multi-Party Computation (MPC), hardware enclaves, and Vaultody Approver features to deliver military-grade protection for digital assets.

Multi-Party Computation (MPC) Technology

• No Single Point of Failure: MPC splits private keys into multiple encrypted fragments distributed among different parties. No single entity, including Vaultody, possesses the complete key.
• Secure Transactions: Transactions require consensus from multiple parties and can’t proceed if any fragment is compromised.
• Adaptive Security Layers: Even if an attacker gains access to one fragment, they can’t move funds without the other fragments.

In incidents like Mt. Gox or KuCoin, where attackers gained access to hot wallets, MPC-based custody would have rendered stolen keys useless without the other key fragments.

Hardware Enclaves & Vaultody Approver

• Trusted Execution Environments (TEEs): Vaultody’s hardware enclaves isolate cryptographic operations in secure, tamper-proof modules.
• Vaultody Approver: Our proprietary Vaultody Approver system adds another layer of security by requiring explicit approvals for critical actions - such as approving transactions and different system actions.
• Transaction Policy Enforcement: Enforces strict rules (e.g., spending limits, white-listed addresses), minimizing the risk of insider fraud or unauthorized transactions.

Had Bybit employed hardware enclaves and a robust approval workflow, hackers would have faced multiple insurmountable barriers during the cold-to-warm wallet transfer.

Robust Role Management & Control Features

• Granular Permissions: Vault owners can assign specific roles and define each role’s permissions for better control over team members` rights.
• Dual/Multiple Signatures: High-stake transactions may require multiple layer sign-offs (depending on policies introduced by the vault owner), reducing the risk of unilateral unauthorized moves.
• System Action Approvals: Every significant action - from withdrawals and deposits to policy changes - demands approvals recorded on an immutable ledger for audit readiness.
• Real-Time Monitoring & Alerts: Instant notifications for any suspicious or high-value transaction give vault owners the ability to intervene immediately.

In the case of FTX, where internal mismanagement played a large role, a comprehensive role-management system and mandatory transaction approvals could have prevented reckless fund usage and unauthorized transfers of customer assets.

The top five crypto exchange hacks and incidents serve as harsh reminders that the stakes are high in digital asset management. From alleged internal fraud to sophisticated cyberattacks, vulnerabilities can stem from poor operational controls, inadequate wallet management, or insufficient monitoring. All of these threats can be mitigated, and even prevented, by adopting Vaultody’s cutting-edge custody solutions.

If you’re serious about safeguarding digital assets and want to learn more about how Vaultody’s MPC technology, hardware enclaves, role-based controls, and approval workflows can shield your exchange or enterprise from becoming the next headline hack, we invite you to:

• Explore our Custody Solutions
• Request a Demo to see Vaultody’s platform in action
• Contact Our Team for a personalized security consultation

Don’t let your organization become the next cautionary tale. Partner with Vaultody and secure your digital assets with confidence.

Disclaimer: External incidents mentioned are based on publicly available information and serve as illustrative examples. Vaultody does not claim involvement or direct knowledge of the internal processes of the aforementioned exchanges.