It's not yet clear how the alleged criminal misconduct of a former employee led to a law enforcement freeze on users' funds.
On Thursday, cryptocurrency exchange Hotbit said it "suspended trading, deposit, withdrawal and funding functions," with no timeframe for resumption. In explaining the decision, Hotbit stated:
"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, a number of 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 further claims that the remainder of its employees are not involved in the project and possess no knowledge of the alleged illicit activities. With regards to the frozen assets, Hotbit says:
"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."
Hotbit is currently headquartered in Hong Kong. As a result of the trading freeze, all unfilled orders will be canceled, and all leveraged exchange-traded fund positions will be liquidated. Meanwhile, Hotbit claims that the income of users' investment products will be distributed normally and that a "compensation plan" for users will be published when the website is resumed. In the past 24 hours, Hotbit processed $25.6 million worth of digital asset transactions.