Misappropriation of funds and assets at financial institutions is a new thing. It’s even rifer in today’s crypto world. Cryptocurrency exchange Hotbit is the latest in the long list of victim firms that have experienced these unauthorized conducts.
While it has been established that a former company employee committed criminal misconduct, it is unclear why and how that led to a law enforcement freeze on users’ funds. As a result of this freeze, Hotbit has announced that it has suspended all trading activities.
On Thursday, the crypto exchange said it “suspended trading, deposit, withdrawal and funding functions” until further notice.
In the statement, the company said: “A former Hotbit management employee who left in April this year was, unbeknownst to Hotbit, involved in a project in 2021 that law enforcement authorities now think is suspected of violating criminal laws. As a result, some Hotbit senior managers have been subpoenaed by law enforcement since the end of July and are assisting in the investigation. Furthermore, law enforcement has frozen some funds of Hotbit, which has prevented Hotbit from running normally.”
The firm also assured that the rest of its employees were not involved in the project and had no knowledge of the alleged misconduct. Explaining the circumstances surrounding the frozen assets, Hotbit said: “The assets of all users are safe on Hotbit. Hotbit will resume normal service as soon as the assets are unfrozen. All user’s assets and data on Hotbit are secure and correct. However, we are still actively cooperating with the law enforcement authorities in their investigations and are continuously communicating with them through our lawyers and applying for the release of funds.”
Located in Hong Kong, Hotbit’s frozen accounts have damning consequences for the company and all its users. It means orders will be canceled, and leveraged exchange-traded fund positions will be liquidated. However, it was also revealed that some of the company’s senior managers received subpoenas late last month and have actively cooperated with the investigating agency.
They did not reveal which agency is handling the investigation and has not returned any requests for a comment on the news.
The company hopes to reinstate its trading activities once the authorities unfreeze its assets, but it does not know exactly when. Hotbit has processed digital asset transactions worth $25.6 million in the last 24 hours, while CoinMarketCap reported $350 million in trade volume. “We are still actively cooperating with the law enforcement authorities in their investigations and are continuously communicating with them through our lawyers and applying for the release of the frozen assets,” the company said. “The assets of all users are safe on Hotbit.”
Hotbit was established in 2018 with over a million users from 170 countries. Its core team members are from the United States, Taiwan and China, while most users are from countries outside China. This is not the first time it has suspended its services, as a cyberattack took down many of its services last year. The attackers also tried to take control of its wallets, making the platform suspend its services for about a week.
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