Scenario #08
THE EXCHANGE COLLAPSE
Counterparty Risk Reality
3:17 AM
Your phone lights up at 3:17 AM with multiple notifications. You groggily check the screen to see news alerts, Telegram messages, and Twitter notifications all saying the same thing:
"MegaCrypto Exchange Halts All Withdrawals"
EXCHANGE STATUS: FUNDS FROZEN
Fully awake now, you quickly scan the news. MegaCrypto, one of the largest exchanges in the world and where you keep a significant portion of your portfolio, has abruptly suspended all withdrawals citing "temporary liquidity issues and security concerns." Their CEO has posted a vague message promising that user funds are safe, but crypto Twitter is already speculating about insolvency.
You have approximately 40% of your total crypto holdings on this exchange, with positions in various altcoins not stored in your self-custody solution.
Your Situation
You frantically assess your exposure:
- 3.2 BTC and 47 ETH on MegaCrypto Exchange, currently inaccessible
- Several significant altcoin positions that were only available on this exchange
- Open limit orders that were still pending
- Trading API keys that might still be active
- Recurring purchases scheduled for tomorrow
- KYC documentation you submitted to the exchange
Your portfolio tracking app notification hits next: "Portfolio down 23% in the last hour"
Immediate Assessment
Exchange Challenge: Containment and Recovery
- What immediate actions can you take to secure remaining exchange access?
- What's your plan for your assets still trapped on the exchange?
- How quickly can you move assets from other exchanges to self-custody?
- What documentation do you have of your holdings on the troubled exchange?
- What legal or insurance protections might apply to your situation?
Complications
As the situation unfolds over the next few hours:
- Other exchanges begin experiencing withdrawal delays due to surging demand
- MegaCrypto's website becomes intermittently inaccessible
- Social media fills with conflicting reports about the exchange's solvency
- You receive an email claiming to be from MegaCrypto asking you to "verify your account through this link"
- A supposed leak suggests the exchange was hacked, contradicting the official statement
- Markets are in freefall with panic selling across the board
Your Mission
Contain the damage from this exchange collapse, secure any assets still under your control, properly document your exchange holdings for potential future claims, and implement measures to prevent similar exposure in the future.
How will you respond to this crisis and what will you change about your crypto security approach afterward?
Your phone rings. It's a friend who also uses MegaCrypto: "Are you seeing this? What should we do? Can we still get our coins out somehow?"
CRISIS TIMELINE: 4 hours since withdrawal freeze
What immediate actions will you take, and how will this change your approach to exchanges?