No Way to Get Your Trapped Funds Out of Collapsed Crypto Platforms, Experts Warn
- Experts have said those whose investments are trapped in collapsed crypto exchanges should just forget them
- According to them, digital assets are not regulated and insured and, therefore, not recoverable unlike deposits in banks
- A lot of exchanges have collapsed in recent times leaving investors funds trapped and their owners in a limbo
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Investors hoping to get their trapped funds from failed crypto exchanges had better ditch the idea as legal experts have said there are no ways around it.
Crypto platforms like Celsius and Voyager Digital which filed for bankruptcy this month have left traders’ funds stranded inside their platforms. Both companies froze their clients’ accounts after a massive rush for withdrawals led to liquidity problems.
Source: Facebook
Collapse leaves investors' funds trapped
Celsius operated mostly like a financial institution which took customer deposits and lent them out on the Defi products to generate high returns.
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CBNC reports that the Voyager had almost the same model. The firm was caught in the fall of a high-profile crypto hedge fund, Three Arrows Capital, which also went bust after it failed to repay a $660 million loan from Voyager.
The crypto market has been left vulnerable to the contagion of such interconnection of the platforms, which left their collapse having a domino effect.
Digital currencies are not regulated which means they do not offer people the same cover they when if they had invested their monies in stocks or saved them in a bank.
No way out of collapse
The Nigeria Deposit Insurance Corporation (NDIC) insures payment of deposits up to the maximum insured sum of N500,000 to a depositor in deposit money banks (DMBs) and Payment Money Banks (PMBs) and N200,000 to a depositor in Microfinance Banks (MFBs) in the event of failure of a participating financial institution
And in the US, the Federal Deposit Insurance Corporation, meanwhile, offers bank depositors protection of up to $250,000 if an insured lender fails.
There are some schemes in place in the U.K. and European Union.
With no legal backing governing crypto assets, there is no guarantee investors would be able to recoup their funds if an exchange were to freeze someone’s account — or, worse yet, completely collapse.
About 180,000 Crypto investors Lose 215.8 billion as Bitcoin trades at $23k
Legit.ng reported that Bitcoin again plummeted to an all-time low of $23,000 on Monday, June 13, 2022.
About 180, 000 traders have lost $520 million, as the largest crypto dips to the lowest point in months, a price not seen since December 2020.
Market sell-off continues and was observed throughout the year. Many have likened the decline in the market to what was witnessed in the 2008 market crash and others compared the sell-offs to the Red Wedding in the famous Game of Thrones.
Source: Legit.ng
