# The Trust Crisis
The collapse of FTX in 2022 wasn't an anomaly—it was the latest in a pattern of catastrophic failures. Mt. Gox. QuadrigaCX. FTX. Each name represents billions in lost user funds, shattered trust, and harsh lessons about centralized custody. Over $24 billion lost since 2012, with each incident larger than the last.
These failures expose a fundamental flaw. When exchanges act as custodians, they become gatekeepers of an opaque system. User funds mix in shared wallets. Assets move between hot and cold storage without transparency. The true state of an exchange's finances remains hidden until crisis strikes.
Traditional auditing fails in this environment. Major firms like Armanino and Mazars have abandoned crypto audits entirely. Even "proof of reserves" reports offer false comfort—they show assets without liabilities, like checking a bank's vault while ignoring its loans. In a system built for transparency, the largest trading venues operate in the dark.
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