On July 22, 2026, the Singapore-based crypto mining pool giant Poolin and its affiliated companies officially filed for Chapter 11 bankruptcy protection in a court in New Jersey, USA. [1] According to the latest court documents disclosed, Poolin currently has liabilities as high as $173 million, with the most shocking part being the unsecured debt amounting to $164 million—which originates from the "IOUs" issued to tens of thousands of users after the company's wallet suspended withdrawals in 2022.
From the issuance of IOUs due to a funding crisis in 2022 to a complete move towards court reorganization in 2026, this four-year delay and decline ultimately led to user assets shrinking into inferior "unsecured claims" in the bankruptcy court.
This prolonged crisis once again sounded the alarm for the entire crypto market: Do not treat an ordinary platform wallet or investment account as professional asset custody. A thorough analysis of the logic behind the Poolin IOU crisis can help investors and high-net-worth individuals recognize the vast differences between "platform credit" and "trust custody."
Restoring the Poolin IOU Crisis: From Liquidity Drought to $160 Million "Air IOUs"
Looking back on this years-long crisis, Poolin's collapse was not an overnight event, but an inevitable result of asset misappropriation, high leverage expansion, and loss of risk control intertwined:
1. Withdrawal Suspension and the Birth of "IOU Notes" (September 2022)
As institutions such as 3AC (Three Arrows Capital) and Celsius faced successive crises, the crypto market plunged into a deep recession in 2022. Starting from September 2, numerous miners reported severe delays in withdrawals from the Poolin Wallet; on September 5, Poolin officially announced the suspension of all withdrawals, swaps, and internal transfers. [2]
In order to quell the anger of users demanding their rights, Poolin launched the so-called "IOU solution" in mid-September: real assets like BTC, ETH, and USDT frozen in user wallets were forcibly converted to platform-issued IOU certificates (like IOUBTC, IOUUSDT, etc.) at a 1:1 ratio. Poolin made grand promises at the time, claiming to gradually redeem these IOUs through quarterly 1:1 buybacks, offsetting mining pool fees, or opening on-chain free trading.
However, in the absence of liquidity and real buyers in the secondary market, these certificates quickly devolved into worthless "air digits," constituting a severe default in practice.
2. Collateral Liquidation and Total Default on Redemptions (Q4 2022)
By the end of 2022, cryptocurrency prices continued to decline, and Poolin's cash flow was completely exhausted, with the previously promised quarterly redemptions unsurprisingly defaulting. Affected users initiated collective rights protection on platforms like Telegram, and some large investors even filed for emergency arbitration at the Singapore International Arbitration Centre (SIAC), demanding the return of their frozen assets. But at this point, Poolin was beyond rescue.
3. Bankruptcy Documents Reveal the Roots of the Crisis
As Chapter 11 bankruptcy documents were disclosed in 2026, the true reasons behind Poolin’s asset hole were thoroughly exposed:
Misappropriation and Leveraged Borrowing: Poolin used its users' assets as collateral to borrow huge sums from third-party lending institutions (such as Antalpha) without risk isolation. [3]
Flawed Heavy Asset Expansion: Poolin invested borrowed funds heavily in building large mining farms in Texas and purchasing mining rigs, only to suffer from severe delays in project construction and inadequate local electricity supply.
Cascading Liquidations Exhausting Liquidity: The bearish conditions in 2022 led to a dramatic drop in cryptocurrency prices, triggering margin calls from lenders. Unable to top up collateral, Poolin's pledged assets were forcibly liquidated by lenders like Antalpha, resulting in an irremediable financial gap in the wallet treasury.
Deadly Misconception: How Platform Wallets Turn Your Assets into "Corporate Liabilities"?
The Poolin incident exposed a major misconception among many investors regarding asset safety—thinking that putting money in a "wallet app" is equivalent to secure custody.
In traditional finance or cryptocurrency platforms without trust guarantees, the underlying operation logic of ordinary wallets is often "on-balance sheet":
【Ordinary Wallet/Investment Platform Model】
User deposits assets ──► Recorded on platform balance sheet ──► Assets mixed with platform's own funds ──► Platform misappropriation/high leverage borrowing
│
(in bankruptcy liquidation)
▼
Users become "unsecured creditors"When users deposit assets into an ordinary wallet, the ownership of the assets is legally and financially blurred. The platform mixes user funds with its own operating capital and even leverages them through rehypothecation to borrow externally.
Once the platform makes investment mistakes or faces a black swan event in the market, the users' absolute ownership of their assets can instantly degrade to being "unsecured claims" against the platform. In the Chapter 11 bankruptcy court, these wallet users holding IOUs have no choice but to queue with vendors, lenders and various creditors to allocate the extremely limited remaining liquidation assets.
Breakthrough for Compliance Custody: Building a Strong "Bankruptcy Isolation" Defense Line with Compliant Trust Structures
"Not your keys, not your coins" is the mantra of crypto enthusiasts; while in the institutional finance world, "Not your qualified trust, not your assets" (Without a compliant trust, there is no safety for assets) is the ultimate rule for ensuring the security of funds.
As a licensed professional compliant digital asset custody institution, Cactus Custody has thoroughly cut off the possibility of platform credit risk transferring to user assets from both legal logic and technical architecture:
【Compliance Custody Model】
Client deposits assets ──► Strictly kept off-balance sheet ──► Legal isolation by trust fiduciary ──► Zero misappropriation/zero rehypothecation
│
(under extreme bankruptcy assumption)
▼
Assets 100% belong to clients, not subject to creditor claims1. True Legal Level Bankruptcy Isolation (Bankruptcy Remote)
This is the fundamental legal boundary between compliant custody and ordinary wallets. Based on a strict trust law framework, the assets deposited by clients in the custody institution are the absolute private property of the clients, strictly kept off the custody institution's balance sheet.
This means that even under extreme assumptions, if the custody institution itself faces any financial crisis or bankruptcy liquidation, clients' assets absolutely will not be included in the estate of bankruptcy liquidation. No creditor of the platform has the right to claim clients' assets, and clients can withdraw their assets in full at any time.
2. Absolute Asset Isolation and Zero Misappropriation (Zero Re-hypothecation)
The root of the Poolin tragedy lies in the unauthorized rehypothecation of user assets to third-party lenders, similar to FTX’s misuse of customer assets for high-leverage investments. Institutions holding trust licenses must adhere to the highest level of fiduciary duty, establishing a fully independent asset isolation system in both technology and operations. Without explicit authorization from clients, custody service providers may not engage in any form of rehypothecation, borrowing, staking mining, or off-balance operations with client assets, completely eliminating the risk of funding disruptions due to third-party liquidations.
Conclusion: Returning Fund Custody to Its Essence
The painful case of Poolin, which took four years and ultimately led to $163 million in liabilities and bankruptcy reorganization, once again warns the industry: Managing user assets like corporate debt is essentially a gamble destined to explode.
For institutional investors, Web3 project parties, and high-net-worth individuals, the bottom line of asset security should not be based on "blind trust" in any single platform or founder, but must be built on a strong fortress constructed by legal constraints, trust isolation, and technological defenses.
Do not treat platform wallets as a safe harbor for assets. Choosing Cactus Custody is not only an institutional-level choice of cold and hot isolation and multi-tiered risk control financial system, but also a selection of a contract strongly protected by modern trust law.
Return custody to its purest essence—your assets, forever and only belong to you.
Reference Materials:
[1] https://backend.theenergymag.com/wp-content/uploads/2026/07/Poolin-Chap-11.pdf
[3] https://theenergymag.com/news/2026-07-23/poolin-chapter-11-bitcoin-pool
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