What Happens If an Exchange You Used Gets Hacked or Shuts Down?

30 October 2026

If a crypto exchange you used gets hacked or shuts down, your tax obligations do not disappear. You still need to report all taxable events that occurred on that exchange, even if you can no longer access your account or your funds are lost. The IRS expects you to reconstruct your transaction history from any records you have, and in some cases, the loss itself may create a deductible event.

Your tax obligations do not end with the exchange

The exchange going offline does not erase your history of trades, sales, or income. Every transaction you made while the exchange was operational remains reportable. The IRS has made clear that taxpayers are responsible for keeping their own records. If the exchange disappears, that burden falls entirely on you.

You will need to report:

• Capital gains or losses from any sales or trades you completed before the hack or shutdown.
• Income from staking, airdrops, or other rewards credited to your account while it was active.
• Any crypto you transferred out before the exchange stopped functioning.

What to Do If You Still Have Access to Your Account

If the exchange is still online but shutting down, or if it has been hacked but not yet taken offline, act quickly to gather your records:

1. Download all transaction history files. Look for CSV or PDF exports of your trade history, deposit and withdrawal logs, and any staking or reward records.
2. Save screenshots of your account dashboard, tax documents, and any communication from the exchange.
3. Check whether the exchange provides a tax report or API that works with crypto tax software. Export that data now.
4. Withdraw any remaining crypto if the exchange allows it. Even if you plan to sell, move the funds to a wallet you control first.

What to Do If the Exchange Is Already Offline

If you can no longer log in, you will need to reconstruct your records from other sources:

• Check your email for trade confirmations, withdrawal receipts, or deposit notifications from the exchange.
• Look at the blockchain. If you know your deposit addresses on the exchange, you can view incoming and outgoing transactions on a block explorer. This may show when you sent crypto in and when you withdrew it, but it will not show trades that happened inside the exchange.
• Review your bank and credit card statements for deposits to the exchange. These can help establish when you funded your account.
• Check your crypto tax software. If you had previously synced the exchange, your software may still hold the transaction data even if the exchange is gone.
• Contact the exchange's official support or its bankruptcy trustee if one has been appointed. In some cases, a defunct exchange will release transaction history files during the legal process.

When a Loss on an Exchange Is Tax Deductible

If the exchange hack or shutdown resulted in crypto that you cannot recover, you may be able to claim a theft loss deduction. The rules changed under the Tax Cuts and Jobs Act of 2017. For individuals, personal casualty and theft losses are only deductible if they result from a federally declared disaster. However, the IRS has provided some guidance suggesting that losses from exchange failures may qualify as theft losses under certain circumstances.

To claim a theft loss:

• You must be able to prove that the loss was due to theft, not mere insolvency or poor business decisions by the exchange.
• You must have a reasonable basis for concluding that the crypto is permanently lost.
• The loss is generally deductible in the year it was discovered, not the year the exchange failed.
• You will need documentation: news reports of the hack, court filings if the exchange entered bankruptcy, or official statements from law enforcement.

This area of tax law remains unsettled. The IRS has not issued clear, specific guidance on crypto exchange failures. If you are considering a theft loss deduction for a significant amount, consult a tax professional who understands crypto.

Common mistakes to avoid

• Assuming you do not have to file because the exchange is gone. The IRS can still match your reported income against data from other sources, including blockchain analysis and information from other exchanges you used.
• Reporting the loss of crypto on the exchange as a capital loss. A theft loss is treated differently from a capital loss. Do not report lost crypto as if you sold it for zero.
• Forgetting to report income you earned before the hack. Staking rewards, airdrops, and trading income from before the exchange failed are still taxable in the year you received them.
• Waiting too long to reconstruct records. The longer you wait, the harder it becomes to find emails, blockchain data, or old statements.

If you eventually recover some crypto

In some exchange bankruptcies, users receive partial repayment years later, often in a different form or value than what was lost. If you recover crypto or cash from a defunct exchange, that recovery may itself have tax consequences. The treatment depends on whether you previously claimed a theft loss deduction and how much you recovered. Keep records of any distributions you receive from bankruptcy proceedings.

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