When a crypto exchange goes bankrupt (e.g. FTX, Celsius, or similar cases), users often receive a liquidation payout â a distribution of assets (crypto and/or fiat) that only partially reflects the value of what they originally held on the platform.
Because the assets held before the collapse and the assets received afterward rarely match in type or value, this scenario cannot be recorded as a simple transfer.
This article explains the correct procedure to reconstruct this event in Finbooks so that cost basis, gains, and losses are calculated accurately.
Why this matters
If the liquidation isn't recorded properly, Finbooks has no way to close out the original holdings on the bankrupt exchange or correctly allocate cost basis to the assets received. This can result in inflated balances, incorrect gain/loss calculations, and inaccurate tax reports.
Step-by-step procedure
1. Calculate the Total Liquidation Value
Add up the market value (at the time of receipt) of all assets you received as part of the liquidation payout. This is your reference figure for distributing value across the original holdings in later steps.
2. Record Outgoing Transactions for the Original Holdings
For every asset you held on the bankrupt exchange, create an outgoing transaction dated on the liquidation date. Set its time to one second before the incoming liquidation transaction, and set the amount equal to the full balance held on that exchange for that asset.
This effectively closes out each original position immediately before the new assets are recorded as received.
3. Determine the Total Cost Basis
Sum the original purchase prices (cost basis) of all the outgoing assets identified in Step 2. This total will be used to proportionally distribute the liquidation value.
4. Calculate Each Outgoing Asset's Weight
For each outgoing asset, divide its individual cost basis by the total cost basis calculated in Step 3. This gives you a percentage weight representing that asset's share of the original portfolio's cost basis.
5. Calculate the Liquidation Value for Each Outgoing Asset
Multiply the total liquidation value (Step 1) by each asset's weight percentage (Step 4). This gives you the specific liquidation value attributable to each individual outgoing asset.
6. Assign the Liquidation Value to the Outgoing Transactions
Update each outgoing transaction created in Step 2, entering the value calculated in Step 5 as that transaction's value.
Result
Once all six steps are complete:
every asset held on the bankrupt exchange is properly closed out with an outgoing transaction
each outgoing transaction carries a value proportionally derived from its original cost basis
the gain or loss on each original holding is calculated correctly, based on the difference between its cost basis and its allocated share of the liquidation value
the newly received assets from the liquidation payout can be recorded as incoming transactions with their own market value as cost basis, ready for future disposal calculations