Hotbit Freezes Withdrawals Following Subpoena of Senior Managers

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Hot­bit – a Shang­hai-based cryp­tocur­ren­cy exchange – has indef­i­nite­ly frozen all trad­ing, deposits, and with­drawals of its users’ cryp­to assets.

Yet unlike oth­er firms, Hot­bit said that its sus­pen­sion of ser­vices is relat­ed to a legal bat­tle it’s fac­ing with law enforce­ment agen­cies, rather than bear mar­ket liq­uid­i­ty issues.

Hotbit’s Legal Drama

Accord­ing to an announce­ment from the com­pa­ny on Wednes­day, the activ­i­ty freeze is due to a for­mer Hot­bit employ­ee hav­ing been involved in a project that law enforce­ment believes may have vio­lat­ed crim­i­nal laws. The exchange clar­i­fied that this project vio­lat­ed Hotbit’s inter­nal poli­cies, and wasn’t known at the time.

As such, numer­ous Hot­bit senior man­agers have been sub­poe­naed by relat­ed enforce­ment agen­cies, and are now assist­ing with their inves­ti­ga­tion. Author­i­ties have also frozen some of the exchange’s funds, which has pre­vent­ed it from con­tin­u­ing oper­a­tions as normal.

“Hot­bit and the rest employ­ees of Hotbit’s man­age­ment are not involved in the project and have no knowl­edge of the ille­gal infor­ma­tion involved in the project,” said the company.

The firm high­light­ed that its users’ funds, though frozen, are still entire­ly safe with the exchange.

While sus­pend­ed, any unfilled open orders pre­vi­ous­ly made by cus­tomers have been can­celed to “pre­vent loss due to mar­ket fluc­tu­a­tions.” Fur­ther­more, all lever­aged ETF posi­tions were forcibly liq­ui­dat­ed at 12:00 PM UST on August 10th.

Users will con­tin­ue to earn income from their “invest­ment prod­ucts” dur­ing the freeze. Last­ly, they will be pro­vid­ed a com­pen­sa­tion plan once Hotbit’s web­site resumes oper­a­tion, at which time still remains unclear.

In a tweet fol­low­ing the announce­ment, Hot­bit said that it is “con­tin­u­ous­ly apply­ing for the release of the frozen assets.”

Another Platform Freezes Funds

Hot­bit is far from the first cryp­to plat­form since June to freeze user with­drawals, with com­pa­nies like Cel­sius, Voy­ager, and Hodl­naut all hav­ing done the same.

That said, the for­mer com­pa­nies’ caus­es for doing so ulti­mate­ly stemmed back to liq­uid­i­ty issues trig­gered by the cryp­to bear mar­ket. In oth­er words, they were actu­al­ly insol­vent and unable to pay their debts. As such, Cel­sius, Voy­ager, and Three Arrows Cap­i­tal have all filed for bank­rupt­cy.

Sim­i­lar to Hot­bit, Coin­FLEX was also forced to freeze with­drawals due to just one individual’s actions in June. That man was Roger Ver – a long­time Bit­coin Cash pro­po­nent who alleged­ly failed to meet his $47 mil­lion mar­gin call at the exchange.

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