Why Did Hotbit Exchange Freeze Customers' Funds?

A cryptocurrency exchange, Hotbit has ceased trading, making deposits, and withdrawing funds after authorities froze some of its funds due to a probable criminal act. Hotbit announced on its website on August 10 that the platform has “suspended trading, deposit, withdrawal, and funding activities” and did not know when it would resume operations. However, the company ensures that consumer funds are secure and those who wager at the best online casino can access funds. 

According to a statement posted on Wednesday, the decision to suspend services was made in response to concerns that a former manager, who Hotbit states resigned in April, was acting “against Hotbits internal standards.” “Law enforcement has frozen some of Hotbits cash, making routine business operations difficult,” the company said in a statement. Once the assets have been unfrozen, Hotbit will resume normal operations. 

Last year, the individual worked on a project outside of the organization, according to Hotbit. According to the police, the suspect has been charged with breaking the law. The employee was hired in April.

Freezing accounts

According to the report, some of the platform’s top executives were called to testify and are assisting with the inquiry towards the end of last month. According to the news statement, a management-level employee participated in a 2021 initiative that police now believe violated the law. Hotbit does not disclose which government agency is investigating its managers or the total value of the frozen funds, which appear to be from the United States.

Regardless of the circumstances, examining the potential initiative led to Hotbit due to its connection to Hotbit’s former manager. According to the news release, no other Hotbit employees were involved in the probe. Nonetheless, they have been assisting with ongoing investigations since July 2022.

During the procedure, a portion of the company’s assets was frozen, making it difficult for the exchange to function normally. It hopes to resume operations once assets are no longer blocked, but no timeframe has been established. CoinMarketCap reports that $350 million was moved on Hotbit, a smaller exchange than Binance and Coinbase, in the past day.

Is Hotbit following a trend?

According to the company’s website, most of its employees are from China, Taiwan, and the United States. Due to the trading suspension, all unfilled orders will be canceled, and any leveraged positions in exchange-traded funds will be liquidated. 

Meanwhile, Hotbit claims that customers’ gains from investments will be distributed periodically and that a “compensation plan” for users will be made public once the service is restored. In the previous twenty-four hours, Hotbit has facilitated digital asset transfers totaling $25,600,000. Before services resume, all unfilled open orders on the platform will be canceled to prevent potential losses, and all leveraged ETF positions will be required to be liquidated.

Even if the cryptocurrency market is now performing well, the negative trend of cryptocurrency companies freezing client money remains strong.

Hotbit is the most recent cryptocurrency exchange to enter our list, launching in 2018. When a hacker removed several of the website’s functions last year, it was inaccessible for around one week. Additionally, attackers attempted to gain access to the exchange’s wallets, but the issue was resolved.

Hotbit is not the only cryptocurrency exchange that has suspended customer withdrawals since June. Hodlnaut, Voyager, and Celsius have all performed the same action. The bitcoin lending firm Voyager halted withdrawals on July 1. The corporation donated approximately $670 million to Three Arrows Capital, a defunct crypto hedge fund that had substantial investments in the Terra ecosystem when it ceased operations. On July 6, Voyager filed for bankruptcy.

In the previous few months, many companies that halted cryptocurrency withdrawals did so because they were going bankrupt. 

The complete failure of Terra in May and the market’s decline in June demonstrated that numerous crypto industry participants had excessive debt and poor risk management. But the former corporations did what they did because they feared running out of money due to the bear market in cryptocurrencies. In other words, they ran out of cash and could not repay their bills. Due to this, they all decide to declare bankruptcy. The bitcoin lending website Celsius halted all withdrawals on June 12, claiming “extreme market conditions” as the reason.

On July 13, the company filed for bankruptcy, and it was later determined that its balance sheet contained a $1.2 billion hole.  Users of Celsius are still unable to access their assets, and they will likely be required to undergo a lengthy bankruptcy proceeding. According to Hotbit, user assets are secure, and the exchange’s investment products will continue to pay out funds as usual. 

Nevertheless, considering recent events in the bitcoin industry, it isn’t easy to remain optimistic when a cryptocurrency company abruptly stops withdrawals.

Photo by Shubham Dhage on Unsplash