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Crypto Exchange Hotbit Suspends Services as Authorities Freeze Funds
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Hotbit is in hot water after becoming yet another crypto exchange to join the growing list of firms suspending withdrawals.
Key Insights:
- Senior managers at the company have been subpoenaed by law enforcement.
- The alleged criminal misconduct of a former employee has led to authorities freezing some of Hotbit’s funds.
- The firm has suspended trading, deposits and withdrawals with no timeframe in place for resumption.
Hotbit, one of Asia’s leading cryptocurrency exchanges, is in hot water after several of its senior managers have been subpoenaed by law enforcement following the freezing of some company funds.
This comes as an ex-employee of the company, who left in April this year, had involvement in an external project that might have violated criminal laws.
Suspended Services
The cryptocurrency exchange, which provides trading services for major coins like Bitcoin (BTC) and Ethereum (ETH), has officially suspending trading, deposits and withdrawals. The firm notes that there is currently no timeframe in place for resumption.
Hotbit has confirmed that an ex-employee who got involved in an external project last year “unbeknownst” to the company, is suspected of breaking the law, although it is not yet clear how the alleged criminal misconduct led to a law enforcement freeze on users’ funds.
While senior managers at Hotbit are assisting law enforcement with their investigation, details about what the external project related to or which specific laws were breached are yet to be disclosed.
What is evident is that the freezing of some of Hotbit’s funds by authorities has prevented it from “running normally”, according to the company which is no longer operational in its services. Notably, the cryptocurrency exchange is registered in Hong Kong and Estonia, with most of its employees originating from China, Taiwan and the United States.
Cascading Effects
The crypto market, which collapsed in May after the algorithmic stablecoin UST lost its peg to the U.S. dollar, saw its market capitalisation fall below $1 trillion for the first time since January 2021. As Terra (LUNA) crashed, wiping out nearly $40 billion in investors’ capital, so too did other cryptocurrencies.
In response, several high-profile crypto companies have suspended trading, deposits and withdrawals amid a liquidity crisis that saw the price of many major coins plummet.
In the case of Hotbit, all unfulfilled open orders have been cancelled to prevent losses, while all leveraged exchange-traded fund (ETF) positions were forcibly liquidated according to their values on August 10.
Troubled crypto exchange Voyager Digital recently launched a ‘Plan of Reorganisation’ to enable clients to regain access to their accounts and subsequently filed for Chapter 11 bankruptcy. The Toronto-based firm estimates that it has more than 100,000 creditors and somewhere between $1 and $10 billion in assets, and liabilities worth the same value.
Similarly, one of the world’s leading crypto lending platforms, Celsius paused all transactions and withdrawals across its network in the wake of Terra’s collapse and then filed for Chapter 11 bankruptcy protection in the Southern District of New York in mid-July.
Singapore-headquartered Zipmex recently sought bankruptcy protection against legal action from creditors shortly after freezing withdrawals on its platform, but has since partially resumed withdrawals.
About the Author
Mohadesa Najumiauthor
Mohadesa Najumi is a British writer who has worked within crypto, forex, financial technology, and the stock market industry. Mohadesa received her MSc in Political Science and International Relations at the University of Amsterdam.
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