- Gatecoin cryptocurrency exchange to cease operation due to financial difficulty
- Hong Kong-based exchange receives winding order from a court
- Company to be liquidated and funds redistributed to creditors
Gatecoin, a Hong Kong-based cryptocurrency exchange which was founded in 2013 notified its customers on March 13, 2019, that it is discontinuing its services due to financial difficulties and that the court has ordered its winding and liquidation in order to compensate creditors.
Gatecoin Faces Issues with Banking Partners, Resorts to PSP
According to Gatecoin, they have been facing financial challenges over a period of time. Most of it can be attributed to their inability to find a reliable Payment Service Provider (PSP) which became an alternative after the issues they faced with banking partners in September 2018.
The company outlined that the French regulated PSP they had resorted to was unable to process most of its transactions on time. As such, it led to a “substantial loss” and in a bid to mitigate these losses, another PSP was relied upon.
While the latter was reportedly a more reliable alternative, it held back most of the company’s funds and all attempts to get them reinstated were futile. They were also advised of the low probability of obtaining these funds in full from the institution.
Virtual Exchange Admits it Faced Financial Difficulties
Therefore, the virtual currency exchange admits that it has been experiencing financial difficulty which has led to its move to close down the business.
In the same vein, an unnamed law court granted a winding order against the company requesting its liquidation. Consequently, the exchange has decided that it will follow due processes in order to ensure that its investors are compensated.
That aside, the closure of =Gatecoin is another blow to the cryptocurrency industry given that it is one of the oldest cryptocurrency exchanges and among the first to be regulated.
The financial challenges, on the other hand, presumably began in May 2016 when the platform was hacked. Due to the attack on its hot wallets, 15 percent of the company’s holdings was reportedly stolen.
Gatecoin, at that time, made a press release to confirm that 250 Bitcoin and 185,000 Ether were hijacked from its platform. As at press time, these cryptocurrencies are valued at about $963,000 and $24 million, respectively.
More Cryptocurrency Exchanges Experience Cash Problems
Of late, a number of digital assets exchange have been negatively impacted by the cryptocurrency winter while others are struggling due to the actions of cybercrime actors.
An instance of the latter is the case of Cryptopia, a New Zealand exchange that was hacked on January 14, 2019, which drew the attention of the local authorities. However, the exchange is now in full swing and intends to use customer balances to ascertain rebates.
QuadrigaCX, a Canadian-based exchange is another which has its own nuts to crack. The platform claimed that they are unable to access the $190 million worth of cryptocurrencies held in a cold store only the late CEO of the company, Gerald Cotten had access to.
Nonetheless, Ernst & Young, an investigator set up by the court to look into the matter reported that the cold store wallets are basically empty.