Thai exchange Zipmex suspends withdrawals

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The latest round of insolvencies in the crypto lending crisis has spread to Southeast Asia, where cryptocurrency exchange Zipmex froze withdrawals and Singapore-based lender Vauld revealed the extent of his losses.

While a number of other crypto lenders, including Voyager Digital, Celsius Network and Babel Finance, have joined Vauld in bankruptcy – technically, Vauld has a “standstill order” – Zipmex is the first exchange hit by the ripples that are are developed from the $48 billion collapse of stablecoin Terra/LUNA in May. The first and biggest casualty was crypto hedge fund Three Arrows Capital, whose insolvency triggered much of the fallout.

See also: Stablecoin Collapse Sent Voyager Digital and Celsius Down Different Paths to Bankruptcy

The wave of bankruptcies and near misses — like lender BlockFi, which was rescued by FTX Exchange CEO Sam Bankman-Fried in what could turn out to be an acquisition — has caused enough fear and mistrust in the world. industry for helping push bitcoin below $20,000 for several weeks.

Reflecting these concerns, the US Department of Justice said Thursday (July 21) that it had charged three people, including a former Coinbase official, with insider trading, in what authorities call the first such case involving a cryptocurrency.

Read more: Feds Charge 3 in First-Ever Crypto Insider Trading Case

The crisis hits traders

Thai company Zipmex halted customer withdrawals on Wednesday July 20. Apart from its home country, it also serves cryptocurrency traders in Indonesia, Singapore, and Australia.

“Due to a combination of circumstances beyond our control, including volatile market conditions and the resulting financial difficulties for our major trading partners, in order to maintain the integrity of our platform, we would be suspending withdrawals until ‘until further notice,’ he said. announcement on Twitter.

In Zipmex’s case, the issue was not market volatility but Babel Finance’s default on a $100 million loan, CoinDesk reported, citing an industry executive briefed on the situation. A Babel spokesperson said the loan was well below $100 million.

Babel Finance froze withdrawals on June 17, citing “unusual liquidity pressures”.

See more: Today in Crypto: Babel Finance Halts Withdrawals

In keeping with the rest of the crisis, Zipmex’s downfall was its own crypto lending platform called ZipUp, he added.

Nonetheless, its withdrawal freeze marks an expansion of the ripple effect, which has so far been limited to crypto lenders offering mind-blowing returns. Celsius, for example, offered 18%.

That said, many top US exchanges have launched loan programs, offering investors exorbitant rates of up to over 20%. The Securities and Exchange Commission (SEC) argued they were illegal securities offerings, forcing BlockFi to pay $100 million to settle a lawsuit and barring Coinbase from offering one until be registered as a broker.

See more: The latest crypto turmoil could signal the end of DeFi Sky-High returns

In many ways, the crisis was caused less by the collapse of Terra/LUNA than by the aggressive and even reckless deployment of customer capital by lenders in high-yield, high-risk decentralized finance (DeFi) by the through large loans to investors like Three Arrows or directly in the case of Celsius.

While Zipmex’s Thai license prohibited it from lending exchange client funds, ZipUp was a standard crypto lender, offering exceptionally high interest on funds locked up by clients.

Read more: Another company cuts withdrawals, highlighting the dangers of crypto lending

The Thai Securities and Exchange Commission asked Zipmex for more information about the withdrawal freeze, including whether ZipUp lent funds to Celsius or Babel Finance.

Risk management debt matures

As for Vauld, he revealed on July 20 that he owed $402 million to creditors, with the lion’s share of $363 million coming from retail investors, The Block reported. About $70 million is missing.

Vauld said his insolvency was not due to bad debt, but rather direct exposure to the Terra/LUNA stablecoin ecosystem and market losses on transactions of several other cryptocurrencies.

Asset and liability mismatches were also a cause, Vauld told The Block, citing too many longer-term loans due in three to 11 months made with short-term deposits. It’s something that Galaxy Digital CEO Mike Novogratz cited as the cause of the crisis at the Bloomberg Crypto conference on July 19, saying it showed investors in the sector “really have very, very little notion.” risk management”.

Also Read: “Bunch of Idiots”: Crypto Pays a High Price for Due Diligence Delinquency

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