Hong Kong-based exchange Hotbit, which has closed down, is accused of RugPull! Response: Asset liquidation was only to return funds to users.

The Hong Kong-based exchange Hotbit announced in May this year that it was ceasing operations, citing asset freezes and service suspensions due to allegations of senior executives' involvement in criminal activities. However, recent reports suggest that Hotbit conducted a RugPull, selling users' tokens to profit hundreds of millions of dollars, resulting in significant losses for multiple victims. In response, Hotbit stated that this action was merely to return assets to users.

Background Summary

In May of this year, CEX Hotbit, a centralized cryptocurrency exchange headquartered in Hong Kong that specializes in offering a wide range of cryptocurrencies, spot trading, and ETF trading services, announced through a press release that it would cease operations with immediate effect. Users were required to withdraw their remaining assets by 4:00 am on June 30, marking the end of its nearly five and a half years in the crypto industry.

Hotbit claimed that the reason for the closure was due to a former internal executive who, since August of last year, had assets frozen as part of an external criminal investigation, leading to the suspension of deposits and withdrawals and causing their business to be unable to operate normally for several months. Additionally, the heavy losses incurred from providing diversified asset services and frequent regulatory setbacks to its CEX business content contributed to the shutdown.

The Hotbit team previously stated:

Centralized exchanges (CEX) have become increasingly complex, with highly interrelated and intricate operations that are difficult to comply with, whether in terms of compliance or decentralization, and are unlikely to meet long-term trends.

It is speculated that Hotbit, upon resuming operations, also faced crises such as the FTX collapse in the past six months, a wave of bank closures, the USDC detachment incident, among others, resulting in a continuous outflow of funds from numerous CEX users, leading to the gradual deterioration of its operations.

Hotbit Accused of Selling User Assets

On July 6, Web3 security service provider SharkTeam's on-chain analysis platform ChainAegis issued a warning that Hotbit was suspected of conducting a RugPull, selling user tokens through on-chain exchanges like PancakeSwap and UniSwap, and profiting millions of dollars.

The DeFi project RichQuack reported on Twitter that it suffered losses of approximately $254,000 in $QUACK and USDT.

Note: The original tweet has been removed.

Victims who suffered significant losses include meme coin projects Baby Doge and Dogelon Mars, collectively losing over $1 million in assets.

Prior to this, Hotbit had announced a $16 million fund allocation plan in full-page image format, but now it is suspected of selling user assets, raising questions among users about the exchange's intentions and practices.

According to reports, the fund allocation plan will compensate $6 million in the form of highly liquid assets such as USDC, and the remaining $10 million in assets will be transferred to DEX tools developed by the exchange itself, currently managed by other teams, with plans to gradually unlock them over the next few years and distribute them via the Arbitrum network.

Hotbit: Selling Assets Only to Return User Assets

On July 7, ChainAegis released two screenshots again to clarify their previous message and communicate with Hotbit:

We are pleased to see market oversight and efforts from the Hotbit team. According to Hotbit's statement, they are liquidating tokens to return assets and pay users. We will continue to monitor and follow up on this matter.