Recently, Hotbit became the latest crypto exchange to wind up its operations amidst a weakening external environment. However, Hotbit is not the only victim caught in a whirlpool of disruptive incidents occurring in the crypto sector. Let’s take at some of the crypto businesses that have closed down their operations this year or have struggled to find rescue deals.
Most cryptocurrencies-related firms have been on the back foot since the beginning of 2022. The repercussions of several flash crashes last year and isolated events, such as the FTX crisis, have led regulators to tighten their grip on the crypto sector. As a result, numerous crypto firms scaled back their operations, and some ultimately shut down.
Recently, Hotbit became the latest crypto exchange to wind up its operations amidst a weakening external environment. However, Hotbit is not the only victim caught in a whirlpool of disruptive incidents occurring in the crypto sector. Let’s take at some of the crypto businesses that have closed down their operations this year or have struggled to find rescue deals.
Hotbit
Crypto exchange Hotbit, which catered to over 5 million users worldwide, ceased its operations on May 22. According to public statements, Hotbit came under financial stress once the FTX crisis sparked significant outflows from the exchange. The recent US banking crisis, which caused USDC to lose its peg against the US dollar, further deteriorated Hotbit’s cash flow. The exchange also added that its business environment worsened following a criminal investigation into a former team member in August 2022.
The Hotbit team added that running a centralised crypto exchange became burdensome amid regulatory uncertainty. It also placed blame on cyberattacks and bad actors infiltrating decentralised finance projects. Hotbit eventually concluded that it was difficult to continue business while supporting a wide range of assets.
Beaxy
Beaxy, a crypto trading platform, closed its doors in March 2023 following an investigation by the US Securities and Exchange Commission (SEC). The investigation found Beaxy guilty of not registering as a national securities exchange, broker, and clearing agency. Furthermore, the founder of Beaxy was also.
Eventually, the exchange suspended its operations, citing an ‘uncertain regulatory environment surrounding the business’. As per court documents, the Beaxy Platform catered to 2,300 users at its peak, out of which 855 were located in the United States.
Bitzlato
A little-known Hong Kong-registered crypto exchange, Bitzlato, was shut down by the US Justice Department in January 2023. Additionally, the founder of the platform, Anatoly Legkodymov, was arrested by FBI agents in connection to money laundering.
Both the Justice Department and the Treasury Department alleged that Bitzlato facilitated the laundering of more than $700 million, which had ties to illicit Russian financial transactions. The authorities claimed that the company’s officials were aware of the criminal origins of the funds.
Bittrex
In April 2023, the crypto exchange Bittrex announced that it would wind down its operations in the United States. Users were informed that their funds could be withdrawn by April 30, while trading would be available until April 14. However, the platform stated that it would continue to serve investors and traders outside of America.
Richie Lai, the co-founder, and CEO of Bittrex expressed on Twitter that it was not economically feasible to continue operating in the current regulatory environment in the US. He mentioned that regulatory requirements are unclear and then enforced without discussion, resulting in an uneven competitive landscape.
Voyager Digital
Voyager Digital was among the most notable firms that suffered once the crypto investment fund, Three Arrows Capital (3AC), was liquidated amidst the Terra disaster. Voyager claimed that it lost a whopping $650 million, held by 3AC.
Although the crypto lender filed for bankruptcy in July 2022, it has made several efforts this year to raise funds through an asset sale to repay creditors.
However, a potential sale to Binance.US fell apart in April 2023, after the latter cited a “hostile and uncertain regulatory climate.” Voyager made this announcement in a court filing earlier this month after Binance US withdrew from a $1 billion deal to acquire its assets.o accused of conducting an unregistered offering of BXY (Beaxy token) and misappropriating the raised funds, which amounted to $8 million.
The charges also extended to several market-makers operating on the platform. Beaxy initially raised funds through an initial coin offering (ICO) for its native token, BXY, in September 2018. The ICO garnered nearly $8 million in Bitcoin (BTC), Ethereum (ETH), and fiat currency from investors who received BXY tokens in exchange for their investment.
Beaxy permitted trading and custody of BXY, in addition to facilitating trade on various other cryptocurrencies. However, the SEC alleged that BXY was an unregistered security and that Beaxy violated the Securities Exchange Act of 1934.
First Published: May 23, 2023 8:14 PM IST
