British Crypto Fintech company Ziglu collapsed with a cumulative loss of $2.7 million in user funds. Reports say the company, which serves as an investment platform, had a shortfall worth millions of pounds.
Administrators said they discovered a £2 million black hole on Ziglu. The company was once compiled the investment community and attracted users for its market-winning rate. At the time, the company was said to have been valued at around £126 million.
But everything fell apart when around 20,000 users on the platform freezed their funds after the Financial Conduct Authority (FCA), which oversees the UK’s financial integrity.
It was revealed last week that the company’s directors were accused of mismanagement of funds owned by users in court last week, and continued to run until they used their funds to ruin the business.
British crypto company Ziglu collapses after mismanagement of users’ funds
Reports say the High Court bankruptcy hearing reported that the funds saved by users who were saved by British fintech companies’ high profit investment products were being used as more general cash flow than intended. The company then applied for its administration in June after it appeared unable to continue practicing.
The funds belonging to the users were frozen in May after the FCA restricted withdrawals from Boost products, and users offered interest rates at invincible prices. The collapse could elici new questions from participants and onlookers about the promise of the high-stakes crypto industry that promises great benefits without traditional protection.
Ziglu was founded by Mark Hipperson, former co-founder of Sterling Bank. The platform allowed users to store, store, and send cryptocurrencies. According to the company, they wanted to make profits from the new world of cryptocurrency and make it easy, secure and affordable for users to save on digital money. The company’s main feature was Boost Investment Products, which offers revenues of up to 6%.
The product was launched in 2021, where interest rates are very low, attracting savers who were desperate to see the return of their investment. However, Ziglu stopped users from withdrawing from the boost fund in May.
Customers may not be able to recover funds
According to the company, around 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 collected as part of the rescue agreement, a large portion of their funds will be wiped out.
The individual deposits and millions of withdrawals belonging to the user are still considered, but remain unknown when the funds are accessible.
In June, customers were given a week to withdraw funds before the company entered management. However, boost products didn’t have the same protection as typical savings accounts. According to the terms, the company can use funds for daily operations and generate returns by lending them.
Ziglu is said to have used its client funds earlier this year after the investment was completed. Hipperson, who recently left the company, said Ziglu’s board of directors and advisors had signed new funding transactions before the restrictions came into effect. He said the investment would ensure that the savers are made all over. As the future of the funds for the Suber remains unknown, the company manager begins looking for new buyers.
US fintech company Robin Hood was approaching securing a $170 million deal for Ziglu in 2022 as part of its plan to enter the UK. But things didn’t come true after the crypto market recession forced them to lower prices before they finally managed to get out of trading.
“We cannot comment on any particular company. While developing UK crypto regulations, we continue to remind people that cryptography is rarely regulated in the UK and is at high risk,” an FCA spokesperson said.