BitMart Withdrawal Issues Spotlight Custody Failures

BitMart reserve doubts trigger renewed custody and solvency concerns

BitMart’s delay in publishing a comprehensive proof-of-reserves report — combined with public withdrawal complaints from crypto projects — has reignited debates about how centralized exchanges custody customer assets and how users can verify solvency during wind-downs.

Key developments and timeline

In late July BitMart began an orderly wind-down of its global trading platform, stopping new registrations and suspending deposits. The exchange has scheduled all trading to end at 01:00 UTC on Aug. 26, with a full platform cessation planned for Jan. 31, 2027. Since the announcement, several token issuers and market makers reported withdrawal problems, while BitMart said it was preparing a proof-of-reserves report but has not yet published a verified statement of assets and liabilities.

Why proof-of-reserves matters — and what’s missing

Proof-of-reserves (PoR) is meant to give customers on-chain or auditor-verified assurance that an exchange controls sufficient assets to cover customer balances at a point in time. However, PoR on its own is often insufficient to establish exchange solvency because it typically shows only assets, not liabilities. A full solvency assessment requires independently verified data that links the disclosed wallets and balances to the exchange and also accounts for obligations to customers, lenders, market makers, and other counterparties.

Arch Lending co-founder and CTO Himanshu Sahay emphasized this distinction: platform statements are not a substitute for independently verifiable custody and balance reports. "Whenever questions arise around withdrawal processing or exchange wind-downs, it points to a structural gap across digital asset markets: the difference between platform-level statements and independent verification," Sahay told reporters.

Limitations of common verification approaches

• Snapshot timing: PoR usually captures a single moment and can miss intraday liabilities or recent outflows.
• Exclusions: Some reserve statements exclude certain wallets, custodial arrangements, or derivative exposures.
• Inclusion proof: Retail customers need a way to confirm their individual balance was included in the audit.
• Control verification: Auditors must prove that the exchange controls the disclosed addresses and that wallets have not been double-counted.

Because of these limitations, industry experts argue that custody design — specifically asset segregation with regulated, third-party custodians — is the more robust long-term solution.

Withdrawal complaints raise pressure on BitMart

Two projects publicly reported problems withdrawing funds from BitMart, adding pressure on the exchange to provide verifiable evidence of liquidity.

• OpenGradient: On Aug. 10, co-founder Matthew Wang said the project’s market-making team could not withdraw balances held on BitMart and described the situation as an apparent insolvency. Wang did not disclose the exact amounts involved. BitMart had not publicly responded to the allegation at the time of the report.
• Scandic Coin: The project reported that withdrawal requests submitted on July 26 covering approximately 21,898 USDT, 926,635 SNC, and another 256 USDT remained unprocessed. Rather than labeling BitMart insolvent, Scandic Coin requested verifiable proof that the exchange had sufficient liquidity to satisfy withdrawals.

Neither complaint alone is definitive proof of insolvency. Withdrawals can be delayed for many legitimate compliance and technical reasons — including identity verification, sanctions screening, Travel Rule checks, or blockchain congestion. BitMart maintains that withdrawal requests remain available and that requests may be subject to checks involving customer identity, login devices, IP addresses, transaction history, destination wallets, and the source of funds.

Why users may not see on-chain evidence

A key frustration for customers is the absence of a transaction hash when a withdrawal has not been broadcast on-chain. Without a broadcasted transaction, there is no on-chain proof that funds left the exchange. BitMart has advised users to monitor account histories and avoid submitting duplicate tickets, noting that submission does not necessarily mean the review has finished or that the transaction has been sent to the blockchain.

Custody design: the structural fix

Sahay and other industry practitioners argue that regulated third-party custody and strict asset segregation are essential to prevent future uncertainty. When customer collateral is held by a qualified, regulated custodian completely separate from an exchange’s operating balance sheet, customers do not have to rely solely on trust or internal statements.

"Maintaining collateral with qualified, regulated custodians completely separate from operating balance sheets is what ensures customers never have to rely on trust alone," Sahay said. He cautioned that custody arrangements implemented only after withdrawal issues emerge do not deliver the intended protection: segregation must be part of platform architecture from the outset, with clear, auditable evidence about where assets reside and how they are protected.

Complementary tools — and their limits

• Third-party custodians: Provide legal separation of assets and professional custody controls.
• Reserve attestations: Offer snapshot evidence of assets, usually issued by auditors or accounting firms.
• Proof-of-liabilities or full balance-sheet audits: Needed to show both assets and obligations.

Proof-of-reserves remains valuable as a transparency tool, but exchanges and auditors should pair PoR with liability reconciliation, ongoing attestations, and clear customer inclusion proofs to reduce ambiguity.

Precedents and industry context

Concerns about wallet visibility and delayed withdrawals have appeared before. In June, on-chain investigator ZachXBT highlighted user reports of prolonged AscendEX withdrawal delays and noted that labeled hot-wallet balances alone did not definitively prove solvency. An exchange can control undisclosed cold wallets or use external custodians that aren’t visible on labeled address lists. Such episodes underline how limited wallet visibility and a lack of audited custody arrangements leave users unable to independently evaluate an exchange’s ability to meet withdrawals.

BitMart’s public response and next steps

BitMart has denied misappropriating customer funds. Founder Sheldon Xia said on Aug. 8 that the core team was conducting an asset inventory, consolidating funds, and maintaining systems necessary for the closure. Xia also indicated the company was considering court involvement and third-party auditors to conduct a transparent review, but he did not provide a publication date or confirm whether any proposed report would cover customer liabilities alongside reserve assets.

The exchange has urged customers to close open positions, cancel pending orders, and redeem balances held in Earn, staking, lending, and other products. BitMart recommended that users submit withdrawal requests before 05:00 UTC on Aug. 26; requests after that time will enter a separate processing track. The company said affected customers would receive instructions via official announcements or direct account notifications outlining additional documents and withdrawal steps.

For U.S.-linked accounts, BitMart has not accepted new registrations since May 2022 and warned that certain older accounts could remain linked to U.S. users. A July notice instructed U.S.-linked customers to complete withdrawals by 23:59 UTC on Aug. 8 and cautioned about potential additional restrictions and document requirements for pending withdrawals.

Market impact: BMX and token volatility

BitMart’s platform token, BMX, plunged roughly 63% in the first 24 hours after the wind-down announcement. CoinGecko data cited previously placed BMX near $0.164 with roughly $6.1 million in daily trading volume, illustrating how exchange announcements can sharply affect native token liquidity and market confidence.

What this means for traders and token projects

• Traders: Maintain diversified custody practices. For large balances, consider withdrawing to self-custody or segregated third-party custodians rather than leaving substantial funds on centralized exchanges, especially when an exchange is winding down or facing operational stress.
• Token issuers and market makers: Avoid overreliance on a single exchange for liquidity or custody. Establish clear withdrawal and contingency plans and, where possible, verify exchange custody arrangements before encouraging token holders to lock or stake assets.
• Institutional participants: Demand verifiable custody arrangements and regular audited reports covering both assets and liabilities. Counterparties should require proof that client assets are held by regulated custodians with clear segregation from operating funds.

Recommendations and best practices for the industry

1. Make third-party custody standard: Exchanges should integrate regulated custodians into platform architecture and present evidence of segregation as part of onboarding and ongoing transparency.
2. Publish comprehensive audits: Reserve reports should be paired with verified liability statements and third-party confirmations that an exchange controls disclosed wallets.
3. Implement continuous attestations: Rather than one-off snapshots, exchanges should pursue recurring attestations or live proof mechanisms where practical.
4. Improve customer inclusion proofs: Audit processes should let individual customers verify that their holdings were included in reserve calculations without exposing sensitive personal data.
5. Strengthen consumer communications: Exchanges must give clear, timely updates about withdrawal status, expected processing times, and required documents to reduce panic-driven behavior.

Conclusion: verification over reassurance

BitMart’s situation underscores a recurrent issue in centralized crypto markets: public assurances and internal statements cannot substitute for independently verifiable custody and audited solvency. While proof-of-reserves remains a useful transparency tool, customers and counterparties increasingly need custody arrangements and audit coverage that demonstrably separate client assets from an exchange’s operational finances. As institutional and retail adoption grows, platforms that can show where and how customer assets are held — with regulated third-party custodians and regular, verifiable audits — will earn greater trust and reduce systemic risks associated with withdrawal stress.