Ziglu Collapse Leaves 4,000 Savers Facing 100% Loss

Thousands of savers in the UK are now facing significant financial losses following the collapse of Ziglu, a British cryptocurrency company. The company, which had attracted customers with promises of market-beating interest rates, has been placed into special administration after the Financial Conduct Authority (FCA) froze customer withdrawal requests. This move has left many of Ziglu's 20,000 customers unable to access their funds, which have been frozen since May.

The collapse of Ziglu raises serious concerns about the management and oversight of the company. A High Court insolvency hearing revealed that directors had used savers' funds to keep the business running until it collapsed. Specifically, funds saved in Ziglu’s high-interest investment product, known as Boost, were used for general cash flow purposes before the company applied for special administration in June. This misuse of funds has left a £2 million shortfall, meaning that the majority of the 4,000 savers who used the Boost product may lose their investments if the funds are not recovered.

Ziglu, founded by former Starling Bank co-founder Mark Hipperson, had positioned itself as a pioneer in the digital money sector. The company's Boost product, launched in 2021, offered returns of up to 6%, attracting savers during a period of historically low interest rates. However, the product was not protected or ring-fenced like typical savings accounts, allowing the company to use the funds for day-to-day spending and generate returns by lending it out. This lack of protection has left savers vulnerable to the company's financial mismanagement.

The collapse of Ziglu is likely to spark new questions about the high-stakes cryptocurrency industry, which has promised huge returns without traditional protections. The company's administrators at RSM are now seeking buyers for the company, but the future of savers' funds remains uncertain. Customers were given a week to withdraw their funds in June before the business applied to go into administration. The administrators must contact customers within eight weeks with details of their proposals for the business, including how funds will be returned.

The situation has been further complicated by a legal challenge from a secured creditor, which sought to appoint a different administrator. The creditor's representative alleged mismanagement and misapplication of funds, claims that were denied by Mark Hipperson. The judge ultimately denied the creditor's application in favor of RSM.

The collapse of Ziglu also highlights the risks associated with investing in unregulated financial products. The FCA has reminded the public that while it is developing the UK’s crypto regulation, crypto remains largely unregulated and high risk. This warning underscores the need for greater oversight and protection for savers in the digital money sector.