Ziglu users face $2.7M losses with British crypto fintech firm on the brink

British crypto fintech firm Ziglu has collapsed alongside a cumulative $2.7 million in losses in user funds. According to reports, the firm, which acts as an investment platform, suffered a shortfall worth millions of pounds. Administrators mentioned that they discovered a £2 million black hole at Ziglu, which suspended withdrawals in May and was put into special administration last week. The company was once the cynosure of the investment community, attracting users due to its market-beating rates. At the time, the company was said to have been valued at around £126 million. However, it all came crashing down when about 20,000 users on its platform had their funds frozen after the Financial Conduct Authority ( FCA ), the body that oversees financial integrity in the United Kingdom, ordered it to suspend withdrawals. The directors at the company were accused of mismanaging funds belonging to users at a court last week where it was revealed that they had used users’ funds to keep the business running until it collapsed. British crypto firm Ziglu collapses after mismanaging users’ funds According to reports, a High Court insolvency hearing was told that funds that users saved in the British fintech firm’s high-interest investment product had been used more as a general cash flow than what it was intended for. The company then applied to be put into administration in June after it looked like it could not carry on with the practice. Funds belonging to its users were frozen in May after the FCA restricted withdrawals from its Boost Product, which offered users interest rates at unbeatable prices. The collapse will likely draw new questions from participants and onlookers about the promise of the high-stakes crypto industry, which promises huge returns without the traditional protections. Ziglu was founded by former Sterling Bank co-founder Mark Hipperson. The platform allowed users to store, save, and send cryptocurrencies. According to the company, it wanted to empower everyone to benefit from the new world of cryptocurrency, allowing users to save and use digital money easily, safely, and affordably. The main feature of the company was its Boost investment products, which offered returns of up to 6pc. The product was launched in 2021, when interest rates were very low, attracting savers who were desperate to see returns on their investments. However, Ziglu suspended users from withdrawing from their Boost funds in May. Customers may not be able to recover their funds According to the company, about 4,000 users used the investment product, with a total balance of up to £2.7 million. The £2 million shortfall means that if the funds are not recovered as part of the rescue deal, the majority of their funds will be wiped out. Millions of pounds in separate deposits and withdrawals belonging to users are still accounted for, although it remains unknown when they will gain access to their funds. In June, customers were given a week to withdraw their funds before the company went into administration. However, the Boost Product did not have the same protection as a typical savings account. According to its terms, the company could use the funds for day-to-day operations and generate returns by lending them out. Ziglu allegedly used customer funds earlier this year after an investment fell through. Mr Hipperson, who recently left the company, mentioned that Ziglu’s board and advisers had been close to closing a deal for new funding before the restrictions went into effect. He said the investment would have ensured that Boost savers were made whole. The administrators of the firm will now start looking for new buyers as the future of savers’ funds remains unclear. United States Fintech firm Robinhood was close to securing a $170 million deal for Ziglu in 2022 as part of its plan to enter the United Kingdom. However, things failed to materialize after the downturn in the crypto market forced them to cut the price before they eventually pulled out of the deal. “We cannot comment on specific firms. We continue to remind people that while we develop the UK’s crypto regulation, crypto remains largely unregulated in the UK and high risk,” an FCA spokesperson said. Cryptopolitan Academy: Tired of market swings? Learn how DeFi can help you build steady passive income. Register Now

Source: Cryptopolitan