The company cited “volatile market conditions” and its exposure to troubled crypto lenders Babel Finance and Celsius for its liquidity crisis in Wednesday’s announcement. The Thai Securities and Exchange Commission has since requested clarifications of Zipmex’s deposited funds, and the company disclosed in a Thursday statement that it loaned $48 million to Babel Finance and $5 million to Celsius.
“Zipmex is part of the crypto contagion fallout,” said Bobby Ong, the co-founder of cryptocurrency data aggregator CoinGecko, “the insolvency of their counterparty has caused Zipmex to not be able to honour its obligation to its depositors.”
Zipmex said that it was working with the two firms to navigate its options. “Our exposure to Celsius was minimal, as such, we were intending to write this off against our own balance sheet,” the company said its Thursday statement. Earlier, Zipmex Thailand’s chief executive Akalarp Yimwilai said in a since-deleted YouTube video that it was in talks with investors for a potential bailout, Bloomberg reported.
Among Zipmex’s products is ZipUp+, which offers as much as 10 percent returns on crypto deposits. The service is currently paused. Zipmex’s trade wallet, which customers use store funds for trading, resumed its withdrawal function on Thursday, but trading was still unavailable.
Cryptocurrency values have plummeted this year — bitcoin is trading near $23,130, down nearly 50 percent this year — wreaking havoc for the sector. Hong Kong-based Babel halted withdrawals last month due to “unusual liquidity pressures.”
New Jersey-based lender Celsius filed for bankruptcy in July after pausing withdrawals for more than a month, where court filings revealed a $1.2 billion hole in the company’s balance sheet. The filing dims hopes that many depositors will be made whole — most retail investors are considered unsecured creditors in a bankruptcy and generally near the back of the line when it comes to being repaid. Plus, legal experts say it could take years for the process to play out.
Three Arrows Capital, a multibillion-dollar crypto hedge fund based in Singapore, fell into liquidation after high-profile defaults. The fund filed for bankruptcy in July, but a subsequent hearing revealed that the physical whereabouts of the company’s two founders were unknown. A federal judge ruled to freeze its remaining asset in the U.S. during the hearing.
In early July, Singapore-based exchange platform Vauld announced a suspension of all withdrawals, trading and deposits for its 800,000 members. Fellow lender, London-based Nexo, was in talks to buy as much as 100 percent of Vauld.
Then there was the downfall of Terra’s stablecoin in May, which cost investors $60 billion and fueled the liquidity crisis at Celsius.
Regulars are taking notice. In Singapore, the government recently announced plans to strengthen its financial agency’s oversight of the industry due to the turmoil in the Southeast Asian cryptoverse.