Today I [SERIOUS]ly read the Terms and Conditions of OKX and Crypto.com

This is the continuation of my previous post, which assessed the ToS of Binance, Kraken and Coinbase. See the TLD;DR for all of these exchanges at the end.

After a judge has ruled that customer's assets do not belong to them based on the bankrupt-firm's Terms of Service (ToS), I decided to check how deep we could go were one of the exchanges in the title to fail. I was looking specifically for insurance and/or ownership of the assets.

OKX

No insurance whatsoever. They are quite emphatic on that, giving you a glimpse on what to expect in the case of an ” irreconcilable shortfall”:

https://preview.redd.it/w54xneuxb7da1.png?width=926&format=png&auto=webp&v=enabled&s=52d3684ed964b9dbe2aa7ed714ec9287b53e7f11

In addition, the text reads:

4.14 When the OKX Platform is unable to operate properly because of the following circumstances and the user is unable to access the Services or place or cancel an order, we assume no liability for damages. These circumstances include, but are not limited to:

(a) system downtime during maintenance as announced by the OKX Platform;

(b) telecom or networking equipment issues;

(c) typhoon, earthquake, tsunami, flood, power failure, war, terrorist attacks, and otherforce majeurefactors;

(d) any other issues, including hacker attacks, computer virus intrusion or attack, Website or backend maintenance and upgrade, banking related issues, government regulation or mandates, freezing order imposed by any Competent Authority and any other third party issues; and

(e) damages to users or other third parties caused by third parties.

On the ownership, even if the assets are considered to be in your name, you're not entitled to anything in the case of a default and/or insolvency. They also reserve the right to register your funds in either their or a custodian's name:

Custody risk

6.36 OKX may hold Fiat Currencies and Digital Assets with third parties. However, the Digital Assets OKX holds are not “deposits” nor are they intended to be held as any other regulated product or service under Applicable Laws.

6.37 In certain circumstances permitted by the Applicable Laws and Regulations or market practice of the relevant jurisdiction OKX may register or record a User’s Account in the name of the custodian or under OKX’s name. If the Accounts are held in the name of the custodian or OKX’s name, such assets may not be segregated from OKX’s assets and, in the event of a default by the custodian or OKX, may not be as well protected from claims of the creditors of the custodian or OKX’s creditors as would be the case if the User’s client assets had been segregated from the assets of the custodian or OKX’s assets.

6.38 In the event of the insolvency or any other analogous proceedings of a third party holding a User’s Fiat Currencies and/or Digital Assets, OKX may only have an unsecured claim against the third party on the behalf of a User and a User may be exposed to the risk that the Fiat Currencies, Digital Assets or any other property received by OKX from the third party is insufficient to satisfy the User’s claim and the claims of all other relevant Users.

6.39 If OKX deposits a User’s Fiat Currencies and/or Digital Assets with a third party, such Fiat Currencies and/or Digital Assets may be pooled with those belonging to other Users. In such circumstances, a User’s individual client entitlements may not be separately identifiable by separate certificates, other physical documents of title or equivalent electronic records and, in the event of an irreconcilable shortfall after OKX’s insolvency, any Users whose assets have been pooled may share in that shortfall in proportion to their original assets in the pool. Any entitlements or other benefits arising in respect of pooled assets will be allocated pro rata to each User whose assets are so pooled.

6.40 Fiat Currencies and/or Digital Assets may be held by a third party appointed in good faith by OKX, or by OKX’s nominees or sub-custodians. Such third parties are not under the control of OKX, and OKX accepts no liability for any default of any nature by such third parties and, in the event of any such default, a User may suffer total or partial loss in respect of the User’s Account. The extent to which a User may recover its Fiat Currencies and/or Digital Assets in jurisdictions may be governed by specific legislation or local rules.

I'm sorry for all the bolding, but I couldn't possibly post this without emphasizing this whole section. It's like you put your money there, they register it somewhere on their name, and if they go bankrupt, well, it's on their name.

Crypto.com

There is only insurance for Unauthorized Transactions, limited to $250,000. You have to open a request and submit proof, but they reserve the right to determine whether a transaction was unauthorized or not:

https://preview.redd.it/ty70ic1097da1.png?width=818&format=png&auto=webp&v=enabled&s=8d76651ab564775e800c3c54a19fff60a34b2608

In fact, they exempt themselves from paying you if the services are closed for any reason whatsoever:

https://preview.redd.it/cwdo439f97da1.png?width=801&format=png&auto=webp&v=enabled&s=56784abc12e14afbb7774c4ca3e3e25baffc440c

In the next paragraphs, they say that you're entitled to your remaining funds in the case of an account closure, but that, by a court order, they might be able to not pay you:

https://preview.redd.it/i7zv8c9y97da1.png?width=797&format=png&auto=webp&v=enabled&s=7af48ee211ef0170194ecc9f6540bc0d8a4cb54c

This means that even if the services are stopped due to a bankruptcy, there's lot of room for you to not get a dime, and please someone correct me if I'm wrong in my interpretation.

Other aspects:

  1. The U.S. terms state that you agree to not be part of a class action and that you waive your rights to a jury trial (p. 25, Art. 16.2 and 16.3, respectively);
  2. They have an interesting section on the risk of using digital assets, with the phrase “Past performance is not an indicator of future performance”. Someone is lurking this sub!

I could not find any mention to the ownership of the assets.

TL;DR

  • Neither provide insurance against bankruptcy (at least not that I could find)
  • Neither acknowledge one's ownership of assets (at least not that I could find)
  • Crypto.com provides insurance up to $250,000 in the case of Unauthorized Transactions, subject to their opinion/take on whether it was really unauthorized or not
  • OKX has a shady part where they reserve the right to deposit your money on their or a custodian's name. If they go bankrupt, you have no claim whatsoever. Now that you're here go and read the OKX part above.

TL;DR from previous post (Binance, Coinbase and Kraken)

  • Kraken and Coinbase acknowledge that assets belong to users
  • Binance does not say anything on ownership (at least not that I could find)
  • I only found insurance information on Coinbase: all balance held in USD (fiat) is insured by default and up to $250,000, or up to $1M dollars for assets in fiat and crypto for Coinbase One users

I was not expecting to see any kind of insurance at all, and am surprised with Coinbase's take on that. Binance was the one with the less amount of information on these topics (at least per my research).

I'm not sure to what extent the assets would still be considered users' property in the case of a bankruptcy filing, though.

Exchanges can change their ToS at anytime, so avoid leaving funds there for longer.

Use exchanges as exchanges. Buy a cold wallet and leave your funds there.

EDIT: nice table summary by user Maleficent_Plankton:

Ownership Insurance
Binance ??? ???
Coinbase Yes Fiat: $250k, $1M combined for CB One users
Crypto.com ??? $250k for unauth. txs
Kraken Yes ???
OKX No ???

38 thoughts on “Today I [SERIOUS]ly read the Terms and Conditions of OKX and Crypto.com”

  1. As the old saying goes “You will own nothing and you will be happy.” Sometimes I just feel like the whole thing is designed to suck money out of small investors. That’s why taking profits is so important, don’t just keep it forever, especially on exchanges. And once you are in profit, sell it, cash out and put it in your regular bank. Take the initial investment out and then play with house’s money. And just buy a hardware wallet.

  2. Thankyou for bringing this up OP, hope this post reaches Front Page so many can know.

    There was a report in early 2022 about CeXes in which there was TLDR of Top 10 Biggest exchanges, all of them had one thing in common

    “We are not liable for repayment of user’s funds in case of any uncertainty” I don’t remember the exact phrase but you get the message.

    Ever since I have read that report, I stopped storing even a single $ worth of crypto on Cexes, I only go there for occasionally conversions or trades. Everyone please keep your crypto in wallets.

  3. Awesome! Now compare that to what the fine print on FDIC accounts.. You’ll find them to be very similar… Exchanges are set up just like banks in a sense where its a form of fractional reserve so they can make money off of you holding. Best to distance from all exchanges and keep your cash under your mattress!

  4. >Crypto.com provides insurance up to $250,000 in the case of Unauthorized Transactions, subject to their opinion/take on whether it was really unauthorized or not

    People get “hacked” (actually “scammed” most often) all the time – is there even a single experience where this was used to help the user? Saying this is in place is easy if you can freely decide to never use it.

    >Neither acknowledge one’s ownership of assets (at least not that I could find)

    This is worrying. Making this statement is easy and it’s true no matter if you say it in your ToS or not. I can only believe they don’t state it to leave a backdoor in case things really go downhill…

  5. What percentage of people do you think actually read all the TOS for everything they use? It has to be less than 0.01%. I feel like I need a lawyer with me to explain what it means anyway.

  6. Thank you for doing hard work and TL;DR their TOS.

    Both of them seems like a mini FTX, I wouldn’t keep any of coins on them.

  7. OKX has quite a colorful history. There’s an ongoing investigation into illegal futures trading. There are also allegations they accept bribes to list certain tokens on the exchange.

    Furthermore, analysis seems to indicate that over 90% of trading volume on the platform is spoofed due to insanely high slippage:

    https://i.imgur.com/LFH40gE.jpg

    https://sylvain-ribes.medium.com/chasing-fake-volume-a-crypto-plague-ea1a3c1e0b5e

    Oh and the exchange’s founder Xu Mingxing has been arrested/detained by Chinese authorities on several occasions.

    https://www.forbes.com/sites/kenrapoza/2020/10/16/chinese-ceo-of-okex-crypto-exchange-arrested-again-whales-bail/

    Personally I would not use the exchange for the abovementioned reasons. That their terms of service offer zero consumer protection is no surprise at all.

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  9. I have sold my soul so many times accepting terms of use that I no longer know how many souls I owe. Any day my legs break.

  10. You can clearly see that they want to cover their own business when things go bad. It’s not so smart to leave your crypto on an exchange in general, because they can do whatever they want with it.

    That’s why the not your keys, not your crypto advice is still underrated in my opinion. Days before the FTX drama this sub was shouting to withdraw everything from there. I’m sure many people listened and saved their assets.

  11. So among all these exchanges whose TOS youve read, CB and Kraken still are the best. I truly hope some of these smaller exchanges present a worthy challenge to Binance at the very least to force every player in the space to improve. Good job as always, buddy!

  12. Given what you’ve read is there one exchange you like more than the others?

    I’ve always learned towards Coinbase and don’t see a reason to change.

  13. We are still here. Like we have mentioned previously, with Kraken your assets belong to YOU! Aside from our focus on customer service, security is one of the pillars of our business.

    Our outgoing CEO Jesse Powell also recommends the use of a hardware wallet to avoid trusting your assets to a third party. Have a great day!

    -Kraken Exchange 🐙

  14. You should also point out that this is US centric only, other countries may have other laws and requirements for exchanges. However its safe to assume that you should expect to get nothing off them if something goes wrong regardless of where you are.

  15. This is really interesting, would love a similar thing made on the fine prints of the banks. Just to compare if what they exchanges do is what the “industry” does too.

    Anyway, it’s always good to know (being a user, too!).

  16. Thank you very much for your work. It’s great to see why nobody should leave their coins on any exchange.

    As long as this is the standard avoid it at all cost.

  17. More you know about exchanges more you understand why self custody is so important.

    You are more patient than I’ll ever be. I gotta admit I’d never fully read these myself but I appreciate your insight!

  18. Okay this is scary. OKX and Crypto.com are just getting so much public exposure with their all-out marketing strategy. Little do the people know about insurance and ownership when they fall for their advertisements

    In the event of a downfall this can again really hurt the market just like FTX. Hope they get some kind of insurance policies in play

  19. The best thing you can do is assume none of them care about you and trust no one.

    Just use an exchange like you’re supposed to. Buy from an exchange and transfer it to your wallet and sleep like a baby.

  20. Coinbase and Kraken are the only exchanges that I’ll use. Coinbase showing they basically own 10% of all BTC was a bit of a sigh of relief, not gonna lie haha.

    Note: Still don’t trust a CEX – never will. But at least Kraken admits we shouldn’t trust them. And at least they’ll say the crypto belongs to us

  21. Dont need to know ToS when your cold storage. Plenty of options in all the ecosystems, but my favorite is DOT. More info here: https://dot-alert.gitbook.io/dot.alert/content/2.storage

  22. Tbf to CDC, they’re just covering their own backs legally.

    If you’re keeping your coins on an exchange and it goes bankrupt, of course you may lose those coins.

  23. You miss one thing: clients of these crypto exchanges don’t have these “Terms and Conditions” printed on paper. So any crypto exchange can alter them at any point of time and print screen of T&C will be not relevant in any court since there are actually now written agreement between two sides with signatures.

  24. If people still have confidence in exchanges, that’s truly unfortunate. As has been shown time and time again, everything looks good right up until you get that nice little notice that withdrawals are frozen. From that point on, it’s game over. I’m definitely a firm believer in 100% self custody now after experiencing loses on exchanges.

  25. Well, can you blame them? They want all the reward when we put of the risk by using their service. Good for them, not so good for us.

  26. Another great post, I use CDC so I was very curious. I don’t leave anything on it though, and clearly no one should

  27. Me without thinking twice and to protect myself I always move my coins to my wallet. Not your keys not your coins. Legally those terms can be tricked by a judge easily.

  28. “Neither provide insurance against bankruptcy (at least not that I could find)
    Neither acknowledge one’s ownership of assets (at least not that I could find)”

    Absolutely expected.

    “Kraken and Coinbase acknowledge that assets belong to users”

    Unexpected and absolutely welcome.

  29. Amazing what happens when you actually read right?

    This is directly because of crypto being a largely unregulated / less regulated business. The responsibility is on the user to either handle your own shit or find someone trustworthy. Sadly, if people actually read then Celsius would have been out of business months before they failed.

  30. Is there any website that reviews these terms and condition I accept forms ? Flags bad T&C practices and something like that. . it sounds like a good business idea. Let me know if there is.

    Thanks.

  31. Can you do the same for NEXO next please? They offer pretty good insurance, but I would be interested if you could find anything deeper.

    Thanks for doing all this btw. Pretty helpful.

  32. Putting crypto on an exchange is like handing money to a bank. It’s your money, sure.

    And yes… the bank or exchange has an obligation (in contract) to return “your” crypto to you.

    What folks need to realize is that bankruptcy essentially intercepts all contractual obligations. In that case, the exchange’s obligation to you is just another contract, amongst many that it cannot fulfill. And then you stand in line with other creditors.

    This is the default position, unless there is some provision that elevates your rights above others, e.g. as a preferred creditor, or as a named beneficiary of an insurance or trust. In the default case, you’ll get back a “fair share” of whatever is left when the dust settles. If anything. It has to be set up as an enforceable trust. If it’s just a contract saying it’s yours… then it’s just a contract.

    Remember: if it’s yours on chain, it’s yours.

    If it’s yours in your contract and they don’t give it back, you can to sue to get it back. But bankruptcy is preemptive of other judgments except in very narrow circumstances.

    TL;DR – If you hand it to an exchange, it’s yours until the exchange is bankrupt. And then it isn’t.

  33. They instructed their lawyers to write “not your keys not your coins” in as many words possible without repetition, using the most confusing language that still resembles somewhat coherent English, but without actually saying the words.

  34. I’m not the most knowledgeable, but I don’t trust CEX with my funds after last year; the only noncustodial app I use is nexo, but I withdrew most of my balance after their last issues with the police and the accusations, so I’ve been looking for options to exchange different coins using their native chains; the best solution I found was to use my ledger with thor swap.

    With this tool, I can have full custody and interact between different chains, I have yet to try it, and it seems to have high fees, although it looks like the best way to control your crypto completely.

  35. Nice work.

    Summarized in table form:

      Ownership Insurance
    Coinbase Yes Fiat: $250K, CB One: $1M combined
    Kraken Yes ??
    Binance ?? ??
    OKX No ??
    CDC ?? $250k for unauthorized Txs
  36. Awesome to read such a detailed and thorough explanation of the fine print which I’m sure few read or worse, properly understood. Thanks OP!

  37. TL;DR – self-custody is best. As soon as you have more than a few hundred dollars worth of anything in an exchange, withdraw it.

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