Zipmex crisis creates toxic Thai legacy

People walk past advertisement screen boards showing crypto exchange platform ‘Zipmex’ in Bangkok on July 27. (Photo: Reuters)

Smith Chayavorakul had been investing in cryptocurrency for eight months, riding the boom-and-bust cycle of market prices. But things changed when the Singapore-based crypto exchange Zipmex prevented investors from making withdrawals after it was caught in the market meltdown.

Zipmex, which also operates in Indonesia and Australia, halted withdrawals on July 20 and later received insolvency protection from the Singaporean government, causing grief for Zipmex investors who were no longer able to access their funds.

The exchange faced problems after releasing ZipUp+, a yield-based investment product for depositing cryptocurrencies such as Bitcoin, and lending money to now-bankrupt crypto companies including Celsius and Babel.

Zipmex revealed that around 60,000-70,000 people invested in ZipUp+, accounting for around 70% of the platform’s investors. The total value of Thai investors’ funds is around 2 billion baht.

The exchange resumed trading on July 28, but investors like Mr Smith completely quit crypto investing after the incident. While he declined to reveal exactly how much he had lost, the Thai investor admitted that while he hopes to get his money back, he believes it is unlikely.

“I find that the view of digital assets in Thailand has been shaken. And there are other types of digital assets such as NFTs [non-fungible tokens] or blockchain, which makes us even more vigilant regarding the recent events,” he said.

Many other investors learnt a lesson from the Zipmex crisis about the risks posed by digital asset exchanges. Even though the assets were licensed by the Securities and Exchange Commission (SEC), this cannot always guarantee the security of the funds.

Individuals have gained new insights for future investments. One investor, who requested anonymity, had a direct involvement with the SEC. The anonymous investor was undeterred by the events and said they would continue to be involved in crypto since it was “fascinating and offered a lot to learn about”.

“I learnt that wit, knowledge, suspicion and considering negative results all have benefits since they help to maintain a clear and calm mind,” the investor said, in relation to the lessons he learned from the situation.

Though the investor would not reveal their identity, going by the online alias “Ez Invest”, they had millions invested in the Zipmex platform. The investor manages a Facebook page named after their moniker, which consists of updates on the admin’s investments and news on decentralised finance, or tech-based finance that removes a central authority during transactions.

Despite the recent difficulties in the Thai crypto sector, the investor said they would continue to be involved in digital assets.

“Zipmex is only one channel for investment. There are still plenty of other options,” the investor said, before providing examples of other exchanges. For instance, they participate in GameFi to earn while playing video games, or collect NFTs, which are a type of digital asset that represents another object, such as an image.

Ez Invest discussed the aftermath of the Zipmex incident in the event that the funds are returned. The investor explained that larger major coins would not likely be affected as much since they follow the global market, but Thai-based local cryptocurrencies are unlikely to be redeemed for the same value as before, due to the baht’s depreciation.

“Another important point is that the frozen assets mean that there undoubtedly will be missed opportunities for investors as time cannot be recalled,” they added.

Additionally, Ez Invest said Zipmex investors’ direct involvement with the SEC is less of a collaboration but rather a “claiming of [one’s] financial rights” in the context of a regulated digital asset exchange.

“It is the SEC’s responsibility to oversee the situation and control as much damage as possible. In fact, Zipmex’s capital should be used to fix the problem and the company’s partnerships should be resolved afterwards. Users should not be the ones to bear the impact,” the investor said.

Since halting withdrawals, Zipmex has tried to show its commitment to resolving the situation. It recently released some cryptocurrencies back to their users. Those that held Solana (SOL), Ripple (XRP), or Cardano (A) now have their assets back in their digital asset wallets.

Zipmex also plans to release Bitcoin (BTC) and Ethereum (ETH) this week, allowing customers to retrieve the coins for the first time since the suspension of withdrawals.