- Thousands face losses as Ziglu collapses with £2M financial shortfall.
- Ziglu enters special administration after FCA freezes customer withdrawal requests.
- High Court finds Ziglu directors misused customer funds for operations.
Thousands of people in the UK now face losing their money after the collapse of Ziglu, a British cryptocurrency company. According to The Telegraph, Administrators have found a £2 million ($2.7 million) shortfall in the company’s finances. The revelation has triggered new concerns among savers who trusted their money to Ziglu.
Ziglu Collapses into Special Administration After FCA Blocks Withdrawals
Ziglu used to be a new hot prospect in the fintech sphere. The firm offered interest rates that are above the market rates and was interested in enabling individuals to enjoy the use of digital money. It was established by Mark Hipperson, who also co-founded Starling Bank. Ziglu has previously been considered to be worth 126 million pounds.
However, things got out of control earlier this year. In May, the Financial Conduct Authority (FCA) compelled Ziglu to halt withdrawals. Out of the 20,000 customers of the company, many of them were not able to access their money at once. They had their savings blocked for weeks.
Subsequently, Ziglu went into special administration last week. This implies that the company has been seized by external professionals in an attempt to come up with a solution. The special administration was necessitated by the fact that there were serious concerns about how the company was dealing with its money.
At a recent High Court hearing, the judge found that Ziglu’s directors misused customer funds. Evidence shows they used the Boost Product, which was meant to earn customers higher returns, to pay for Ziglu’s daily expenses instead. As a result, around 4,000 customers now have about £3.6 million frozen in Boost savings.
Unfortunately, most of this money could be lost because there is a £2 million shortfall in Ziglu’s finances. Therefore, unless the administrators find a new buyer or a rescue deal, many savers may never see their money again.
Ziglu Collapse Highlights Risks of High-Yield Crypto Savings
In June, Ziglu said it would enter administration and told customers they had one week to withdraw their funds. Unfortunately, a lot of individuals were not able to withdraw their funds on time. The Boost Product was not insured just like a normal savings account. The company was able to utilize the money of the customers in its operations and to reimburse them by lending out the money.
Ziglu once had big dreams. In 2022, the company even agreed to a deal with a large US fintech firm. The latter deal later collapsed after the crypto market crashed. Subsequently, Ziglu found it difficult to attract new investors. Mark Hipperson, the former CEO, stated that the company was close to raising new financing. He asserts that the lost deal would have safeguarded the money of customers.
The administrators now have to seek buyers for the remaining business of Ziglu. This is the possibility of savers getting some of their money back in case they can find a buyer who will purchase the company. Otherwise, thousands of individuals will lose most of their savings.
This failure is a lesson to all investors in crypto products. The prospect of high returns was appealing to many. However, the normal protections of regular bank accounts are not always applied to these products.
At this point, the customers of Ziglu can only wait and hope. The administrators are seeking solutions. Their savings remain for the future. The next move will be closely monitored by many savers.
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