Evaluating only Liquid’s profile at its peak — without knowing the outcome — the model ranked Fraud as the #1 likely cause. Documented cause: Market collapse.
Key Events Timeline
FOUNDING
Liquid founded
DOWN ROUND
Sector contagion hits funding
SHUTDOWN
Sudden Collapse: Liquid ceases operations
Full Analysis
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Documented cause
Liquid (formerly Quoine) was one of Japan largest crypto exchanges, founded in 2014 and backed by SBI Group with $105M. In August 2021 the exchange was hacked for approximately $90M in cryptocurrency. FTX provided a recovery loan that allowed Liquid to reimburse customers. In February 2022, FTX acquired Liquid outright. When FTX filed for bankruptcy in November 2022, the Japanese subsidiary (now FTX Japan) was immediately frozen — despite Japanese regulators requiring segregated customer funds. Customer withdrawals were suspended for months. The once-independent exchange had essentially ceased to exist as a going concern.
Lesson
“Accepting a rescue acquisition from a counterparty whose own solvency is questionable converts a local risk (hack) into an existential risk (acquirer bankruptcy). Liquid survived its 2021 hack by becoming dependent on FTX — which created a fatal single point of failure.”