Key Takeaways:
- Hotbit exchange closes shop.
- Several reasons behind the decision, the exchange says.
- The former management might be responsible for the crucial setback.
YEREVAN (CoinChapter.com) – Hotbit, a Hong Kong-based crypto exchange with over 5 million users, halted all operations, as per the announcement on May 22. “It’s time to take a bow,” read the official press release, asking the users to remove their funds until June 21, UTC 04:00.
Hotbit did not withstand the “deterioration of the operating conditions.”
According to the mentioned press release, the exchange halted operations due to its inability to fight worsening market conditions, among other factors.
The industry has experienced a series of crises, including the collapse of FTX, bank crises causing USDC off-peg incidents, resulting in continuous outflows of funds from CEX users, including Hotbit, and deteriorating cash flow.
commented the exchange.
The team also noted that the successive collapse of large centralized institutions forced the industry to choose between “embracing the regulation” or becoming more decentralized.
The Hotbit team believes that centralized exchanges (CEX) are becoming increasingly cumbersome, with highly complex and interconnected businesses that are difficult to comply with, whether for compliance or decentralization and are unlikely to meet long-term trends.
noted Hotbit.
The unreliability of their initial listing model also played a part in Hotbit’s decision. The exchange featured a wide range of tokens, many of which carried higher risks than others. Hotbit asserted that the operation model of supporting a “diverse range of assets is unsustainable from a risk management standpoint.”
Was former management to blame?
Additionally, the team named “deterioration of the operating conditions” one of the leading reasons behind the exchange’s troubles. Meanwhile, the “deterioration” itself stemmed from a 2022 investigation by the Chinese police involving Hotbit management.
Crypto reporter Colin Wu also mentioned the 2022 incident, alleging that “the founder of Hotbit” participated in the shady project investigated by the Chinese police.
The press release on the incident read the following:
A former management employee who left Hotbit in April this year was involved in a project last year (which was against Hotbit’s internal principles and of which Hotbit was unknown) that law enforcement authorities now think is suspected of violating criminal laws.
read the announcement.
After the investigation, a number of Hotbit senior managers have been subpoenaed by law enforcement. They were allegedly “assisting in the investigation.” However, law enforcement froze some funds of Hotbit, which “prevented Hotbit from running normally.”
Thus, the exchange says, the temporary halt in 2022 led to liquidity difficulties.
Also read: China-US relations worsen as Beijing sentences old US citizen to life in prison.
