HotBit’s truly grateful for your patience. We understand that the past 2 weeks have been extremely difficult for you. At present, there has been significant progress and here it is:
Yesterday, all of Hotbit's employees involved in the investigation have returned home safely, so we have thereby obtained the full details of this case.
The reason for this case: a former member of Hotbit's team joined a GameFi project in private in 2021 (this is a serious violation of Hotbit's internal regulations).
After receiving case reports from users in certain country, law enforcement authorities started investigating the GameFi project. During the investigation, the law enforcement
department found that: 1. A guy who played key role of the GameFi project, was working for
Hotbit; 2. Hotbit was the first to list the project's token and the trading volume was quite high. So law enforcement authorities assumed that Hotbit might be the main backer behind this GameFi project and therefore launched an investigation against Hotbit.
Hotbit team is “Decentralized” globally; however, four members, including one of Hotbit's major shareholders (we call him/her "Sheep" in the following), reside in the country where the case are reported. So law enforcement took them away at the end of July for investigation.
At the same time, law enforcement froze various personal accounts of Sheep, including his/her private account on a large crypto exchange, which caused liquidity problems for Hotbit. The reason is: the account is not stored with Sheep's private assets, but with Hotbit's assets used for Market Making (hereinafter referred to as MM).
In the early days of Hotbit, MM team have been using Sheep's private account with better rates, which could help MM provide Hotbit with better liquidity.
Due to the considerable transaction volume of Hotbit, MM needs to store a large amount of assets in the account. The freezing of the account directly prevents the related crypto assets stored in it from being returned to Hotbit, so it cannot meet the withdrawal requests for all customers.
In addition, with the absence of four key members, the exchange could not be run efficiently, so Hotbit had to suspend all platform services (More details: https://hotbit.zendesk.com/hc/en-us/articles/8074249353495).
As law enforcement is not very familiar with blockchain technology, the whole investigation and evidence collection process of the case runs rather slow.
Good news is that the law enforcement have basically determined that the Hotbit platform and the four members did not violate the law in this case, so all 4 persons were released. Theoretically, Hotbit can be rebooted.
But the bad news is that according to the country's judicial process, the frozen assets cannot be released immediately, so Hotbit team have to keep talking with law enforcement about Sheep's account unfreeze (we are optimistic but the exact time is still uncertain).
So right now, about 70 kinds of crypto assets associated with the case are frozen and could not be withdrawn 100% , but all other assets are good.
We are currently working on the following :
1. Hotbit team is currently looking for opportunities for mergers & acquisitions or loans. Our offer is: as long as the other party can ensure that 100% of all user funds could get redeemed, we are happy to discuss any other terms.
2. We are making inventory of all assets on Hotbit and discussing several plans to reopen the platform. The most conservative estimation is that we can guarantee that users can start withdrawing unaffected assets within 2 weeks.
3. We are conducting various internal reviews to eliminate hidden dangers as much as possible and avoid similar issues in the future.
2022 is an unusual year. Everyone seems to be recalling the grand feast that has just ended, and suddenly several mighty kingdoms got cursed and vanished in days.
The Hotbit team, which was initially proud to have dodged so many traps, was unexpectedly hit with such an ironic blow.
The road to restart will be around the corner, and we still have strong faith about the decentralized wonder world ahead. We will do our best, so please stay tuned for our next follow-up announcements.
August 28th, 2022
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