Shalini Nagarajan

Crypto exchange Hotbit is winding down its primary platform in response to a series of crises.



Hotbit cited the <a href="https://blockworks.co/news/crypto-exchange-hotbit-suspends-trade-after-authorities-freeze-funds" target="_blank" rel="noreferrer noopener">aftermath of a criminal investigation</a> opened last August for its decision to shutter. Hotbit had suspended deposits, withdrawals and live trade for several weeks after authorities froze its operational funds.



&#8220;For five years and years months, the Hotbit team has been proud to participate in a wonderful crypto show with 5 million users. However, it is with great regret that we have made the decision to stop all CEX operations from [May 22, 2023],&#8221; Hotbit said in a notice posted to its website.



The exchange&#8217;s previous trading halt followed allegations of misconduct by a former manager. The specific violations were not disclosed, but the company said the implicated staff had left months earlier.



Prior to this, senior managers at Hotbit were subpoenaed last July and reportedly cooperated with the ongoing investigation. Hotbit did not disclose the identity of the jurisdictional agency responsible for probing the actions of its managers.



The firm said its cash flow only worsened after the investigation. In a <a href="https://hotbit.zendesk.com/hc/en-us/articles/14750194236823-It-s-time-to-take-a-bow" target="_blank" rel="noreferrer noopener">blog</a> on Monday, Hotbit cited effects from FTX’s collapse a few months later, as well as bank crises resulting in USDC&#8217;s <a href="https://blockworks.co/news/circle-usdc-tether-competition" target="_blank" rel="noreferrer noopener">brief depegging earlier this year</a>. An uptick in outflows from centralized exchanges followed, Hotbit noted.



Hotbit suggested that running centralized exchanges could become more difficult in the future as global regulations tighten.



“The Hotbit team believes that centralized exchanges 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,” it said.



Hotbit said it faced other issues, including frequent cyber attacks and the exploitation of project vulnerabilities by malicious users, leading to substantial losses. As a result, the team found supporting trade in diverse crypto assets unsustainable for risk management.



Hotbit says it is registered in both Estonia and Hong Kong but operates from Shanghai and Taipai. The platform processed about $109 million in crypto trade over the past 24 hours, per CoinGecko. Hotbit didn’t return Blockworks’ request for comment by press time. 



Hotbit requested users withdraw their assets before June 21. 



&#8220;That’s all, with so many joys and tears, our show is over. We want to say thank you and take a bow now. We still believe a bright future about crypto innovation and some of us will still fight for it,&#8221; Hotbit said.



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Crypto Exchange Hotbit Shuts Down 9 Months After Criminal Probe

<div id="highlights-block_62f4d375661c1" class="highlights">
 <ul>
 <li>Hotbit says some of its senior managers were subpoenaed in July over an alleged criminal matter</li>
 <li> The exchange expects to resume trade once frozen funds are returned but it&#8217;s unknown when that will be, if at all</li>
 </ul>
 
</div>



Cryptocurrency exchange Hotbit has suspended trading, deposits and withdrawals after authorities froze some of its funds over a suspected violation of criminal law.&nbsp;



The move to suspend services came after allegations that a former manager, who Hotbit said left in April, was involved in activities that went “against Hotbit’s internal principles,” the company said in a <a href="https://hotbit.zendesk.com/hc/en-us/articles/8074249353495" target="_blank" rel="noreferrer noopener">statement</a> on Wednesday.&nbsp;



Some of the platform’s senior managers were subpoenaed late last month and are cooperating with the agency’s investigation, it added.



Hotbit didn’t mention which jurisdictional agency is investigating its managers, or the total value of the frozen funds, although it appears unlikely to be from the US. 



The company’s <a href="https://www.hotbit.io/support?page=aboutUs" target="_blank" rel="noreferrer noopener">about</a> page says it’s registered to both Estonia and Hong Kong while its based in Shanghai and Taipei. CB Insights <a href="https://www.cbinsights.com/investor/hotbit" target="_blank" rel="noreferrer noopener">lists</a> Hotbit’s headquarters in Hong Kong while <a href="https://www.crunchbase.com/organization/hotbit" target="_blank" rel="noreferrer noopener">Crunchbase</a> reports Beijing.&nbsp;



Hotbit didn’t return Blockworks’ request for comment on its trade suspension and confirmation of where it’s headquartered by press time.



It expects to resume services once assets are unfrozen, but the firm isn’t sure when that will be. Hotbit, a smaller exchange relative to the likes of Binance and Coinbase, reported $350 million in trade volume over the past day, per <a href="https://coinmarketcap.com/exchanges/hotbit/" target="_blank" rel="noreferrer noopener">CoinMarketCap</a>.



The company claims other employees of Hotbit’s management, and the platform itself, were not involved in the alleged illicit activities under investigation.



“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,” Hotbit said in its announcement. “The assets of all users are safe on Hotbit.”



Unfulfilled open orders on the platform will be invalidated before services resume in order to prevent possible losses, and all leveraged ETF positions will be forcefully liquidated.



Founded in 2018, Hotbit says it has more than one million users from 170 countries. The firm’s core team members are from the US, China and Taiwan, and over 90% of its users are non-Chinese, according to its <a href="https://www.hotbit.io/support?page=aboutUs" target="_blank" rel="noreferrer noopener">website</a>. 



Last year, the platform suspended services for about a week after a <a href="https://hotbit.zendesk.com/hc/en-us/articles/1500008915521-" target="_blank" rel="noreferrer noopener">cyberattack</a> took down many of its services. The attackers also attempted to take control of the exchange’s wallets.



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