You will build a checklist of warning signs drawn from the 2022 failures that you can apply to any crypto platform.
After Terra, Mei Ling swore off crypto. A year later, a colleague showed her a new platform paying a steady yield on stablecoins, backed by what it called a conservative lending strategy. It sounded different. She wanted a way to tell whether it really was, without relying on her memory of a bad year or on her colleague's enthusiasm. That is what a red-flag checklist is for. You write it once, while the lessons of 2022 are fresh, and run every platform through it before your money goes in.
Allow about 25 minutes. You will write eight to ten warning signs, each tied to one of the five collapses in this module, and then test the list on one real platform.
Go back through lessons 5.1 to 5.3 and, for each failure, ask what a customer could have noticed beforehand. Three groups of signs come up again and again.
The first group is about the yield. Terra's Anchor paid more than its borrowers could cover. Celsius, Hodlnaut and Zipmex paid yields that came from lending out customers' coins. So a yield with no clear source, or a source that depends on your coins leaving the platform, is a red flag.
The second group is about where customer assets sit. FTX used customer funds for a related trading firm. Celsius's terms made customers' deposited coins the firm's property. So assets that are lent out, mixed with the firm's own, or moved to related companies are red flags. So are terms that make you an unsecured creditor.
The third group is about oversight. FTX's international exchange held no MAS licence. Nothing outside Terra's own system stood behind UST. So no licence from MAS, no segregation of customer assets, and no independent audit are red flags in their own right.
A useful red flag is something you can answer yes or no to, from evidence you can find. "Seems dodgy" is not checkable. "Pays a yield and cannot say who pays it" is.
Write each item as a short sentence and add, in brackets, the collapse it comes from. Here is a worked example with nine items.
Pays a yield on deposits and cannot explain in plain words who pays it and from what activity (Terra, Celsius). The yield is far above what banks or government securities pay, with no matching extra risk disclosed (Terra). The stablecoin it uses or offers is held up by a mechanism or a linked token instead of reserves (Terra). Its terms say it may lend out, stake or otherwise use customers' tokens (Celsius, Hodlnaut). Its terms make customers unsecured creditors if the firm fails, or say deposited coins become the firm's property (Celsius). It sends customer assets to other lenders or platforms you have never heard of (Zipmex). It is closely linked to a trading firm or other company under the same owners, with no clear separation of customer assets (FTX). It holds no MAS licence for digital payment token services, so no Singapore regulator supervises how it holds your assets (FTX). It has started limiting, delaying or adding conditions to withdrawals (Celsius, Hodlnaut, Zipmex).
That last item deserves extra weight. In all three lending failures, slowed or limited withdrawals came before or at the same time as a full freeze. If a platform you use starts doing this, treat it as a reason to withdraw while you still can, and read lesson 8.2, Rebalancing and exit rules, written before you need them, when you get there.
You can add a tenth item of your own, perhaps about who audits the firm or how often it publishes proof of reserves. Keep every item tied to something that actually happened.
This checklist is for real firms that can still fail. Fake platforms, where the profits on screen never existed and withdrawals were never possible, are a different problem with different signs, such as a stranger who contacted you first, or pressure to deposit more before you can withdraw. Those are taught in Scam-proof your money, especially lesson 4.1, Fake platforms show profits you can never withdraw. If something on your list is really about spotting a scam, move it there.
Pick one crypto platform you use or have considered. Go through each item and mark it yes, no or unknown, writing down the evidence for each: a sentence from the terms, a search in the MAS Financial Institutions Directory, the source of the yield as the platform explains it.
Here is how Mei Ling's test went on the stablecoin yield platform. It held no MAS licence. Its terms said deposited stablecoins could be lent to institutional borrowers, who were not named. It paid a yield and described the source as "lending and market-making", which did not tell her who paid. That was three clear red flags and two unknowns before she reached the end of the list. She did not need to decide whether the platform would fail. She only needed to see that it had the same shape as the ones that did.
Count unknowns honestly. An item you could not check is not a pass. If a platform will not tell you how it holds your assets, that silence belongs on the list as a flag.
Eight to ten items, each a checkable sentence tied to a named collapse, followed by one platform's results with evidence for every answer. Keep it with your exchange check from lesson 3.4, Run a licence and terms check on one exchange, because your final project will draw on both. Now choose the platform you will test, and start writing your list.
Write a red-flag checklist of eight to ten items, each tied to one of the five collapses, and test it on one platform you use or have considered.
Junxiong-WFG Organisation is an authorised representative of AIA Financial Advisers Private Limited (Reg. No. 201715016G).