Ziglu £2 million Black Hole

Thousands of UK investors are facing the prospect of losing their investment after administrators uncovered a £2 million shortfall at Ziglu, a British cryptocurrency fintech that collapsed earlier this year.

The company, which had suspended customer withdrawals in May, was placed into special administration last week following mounting concerns over its financial management.

Ziglu attracted approximately 20,000 customers with the promise of high-interest returns, particularly through its flagship “Boost” product, which offered yields as high as 6%.

Launched in 2021 during a period of low interest rates, Boost rapidly gained popularity among savers seeking better returns.

But little did the customers know that Ziglu was actually using its customer deposits to run its business operations.

After its dirty operations came to light, the UK’s Financial Conduct Authority (FCA) quickily intervene, and froze all withdrawals, leaving thousands of savers unable to access their funds for weeks.

According to recent reports, around 4,000 customers had their Boost investments frozen, totaling about $3.6 million.

With the newly revealed $2.7 million shortfall, a majority of these funds could be lost unless a rescue or sale deal is secured.

Ziglu using Customer's Investments To Run Business

During a recent High Court insolvency hearing, Ziglu’s directors faced accusations of mismanaging customer funds.

Evidence presented suggested that money from Boost savers was diverted to address general cash flow issues before the company entered special administration in June.

Founded by Mark Hipperson, a former co-founder of Starling Bank, Ziglu positioned itself as a pioneer in making digital money accessible and secure for everyone.

The company was once valued at $170 million and had even secured a deal with US fintech giant Robinhood in 2022.

However, that acquisition ultimately collapsed amid broader turmoil in the crypto markets. Ziglu’s administrators, RSM, are now seeking potential buyers for the company in hopes of recovering value for creditors and affected customers.

Users Blamed The Flawed UK Regulations

The collapse of Ziglu has reignited criticism of the UK’s regulatory approach to digital assets. Industry experts have pointed to “policy procrastination” as a key reason the UK is falling behind the European Union and the United States in crypto regulation.

Unlike the EU’s comprehensive Markets in Crypto-Assets (MiCA) framework and the recent passage of the GENIUS Act in the US Senate, the UK’s FCA has yet to announce a definitive launch date for its own crypto regulatory regime.

John Orchard and Lewis McLellan of the Digital Monetary Institute recently argued that the UK has squandered its early lead in distributed ledger technology by failing to implement concrete regulatory measures.

The lack of clear guidelines has left both companies and consumers exposed to greater risk in an increasingly competitive global market.

As administrators work to find a buyer for Ziglu and recover lost funds, the case serves as a stark reminder of the risks associated with unregulated crypto investment products.

The situation also underscores the urgent need for the UK to establish a robust regulatory framework to protect consumers and foster sustainable growth in the digital asset sector.