Administrators for Ziglu, the collapsed United Kingdom-based crypto firm, have reportedly uncovered a shortfall of $2.7 million (£2 million), raising the likelihood that investors may lose their entire investment. The discovery came after authorities placed the firm into special administration in the first week of July.

The discovery and placement into administration came more than a month after Ziglu suspended withdrawals at the behest of the Financial Conduct Authority (FCA). The withdrawal freeze reportedly left many of its 20,000 customers unable to access their funds. The firm, which was at one point valued at $170 million, is believed to have lured customers with its “market-beating” interest rates.

However, during a recent hearing into the firm’s affairs, the High Court was told that Ziglu management had used customer funds to keep the business afloat until its collapse. In June, the firm formally applied to be placed into special administration, a move usually intended to keep essential services operating and customers’ assets protected.

In addition to providing a platform for storing and transferring cryptocurrency, Ziglu offered an investment product known as “Boost” starting in 2021 that offered returns of up to 6%. The product was launched at a time when interest rates were very low. Nevertheless, when an investment deal failed to materialize, Ziglu management allegedly used customer funds.

Ziglu’s administrators from the firm RSM will now seek buyers for the company after the court rejected an application by secured creditor Factortech Funding to appoint a different administrator. RSM has eight weeks to contact customers with detailed proposals to dispose of the business and outline reimbursement plans.

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