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Stream Finance Suspends Withdrawals Following $93M Loss

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  Published in Business and Finance on Tuesday, November 4th 2025 at 1:27 GMT by cryptonews
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Steam Finance Suspends Withdrawals Amid a $93 Million Loss

Steam Finance, a cryptocurrency exchange based in Hong Kong and known for its “Steam” branded platform, announced on Thursday that it had temporarily halted all withdrawals following a dramatic loss of $93 million in assets. The move, which came after a series of rapid, opaque trades and a sudden collapse in liquidity, has raised alarm bells across the crypto community and prompted questions about the firm’s risk‑management practices, regulatory compliance, and long‑term viability.

What Happened?

According to a statement released by Steam Finance on its official Twitter account and posted on its website, the exchange suffered a significant loss after an investment in a private‑equity fund that failed to deliver the expected returns. The company disclosed that it had “invested $200 million in a high‑yield, short‑term portfolio” that turned out to be a “malfunctioning or fraudulent investment vehicle.” The loss of $93 million was a direct consequence of this failed investment, which has left the exchange with an exposure that far exceeds its available reserves.

The company’s announcement began with an apology to its users and outlined an emergency plan that included a temporary suspension of withdrawals, a thorough audit of its internal controls, and a request for regulators to step in. Steam Finance stated that it was in talks with the Hong Kong Monetary Authority (HKMA) and the Securities and Futures Commission (SFC) to investigate the incident and to ensure that the platform’s liquidity was restored before normal operations could resume.

The withdrawal suspension was not limited to fiat deposits. Users holding various cryptocurrencies on the platform—such as Bitcoin, Ethereum, and a handful of lesser‑traded altcoins—were also prevented from pulling their funds. The firm said it would prioritize the recovery of fiat balances, but crypto withdrawals would remain frozen until a risk‑assessment is completed.

Background on Steam Finance

Steam Finance was launched in 2017 and positioned itself as a hybrid exchange that combined retail trading with institutional services. Its “Steam” brand was heavily marketed on social media and in niche crypto forums. The company boasted a daily trading volume of $200 million in early 2023 and claimed a strong partnership with the “Steam” brand in the gaming industry, which, however, turned out to be a marketing misnomer rather than a direct collaboration.

Over the past year, the platform experienced rapid growth, attracting roughly 1.2 million new users in the first quarter of 2024 alone. Yet, its rapid expansion outpaced its internal risk controls. According to a leaked internal audit report obtained by the crypto watchdog site Coindesk, Steam Finance had a significant concentration of exposure to a handful of high‑yield funds, with no clear stop‑loss mechanisms in place. The audit also highlighted a lack of segregated accounts for users’ funds, a key regulatory requirement in many jurisdictions.

How the Loss Materialized

The loss materialized after Steam Finance invested a large portion of its reserves into a “structured note” linked to a private‑equity investment fund. The note promised a return of 18 % over six months, a figure that appeared attractive to the exchange’s risk appetite. However, the fund, which was not registered with the SFC, was later found to have been a “Ponzi scheme” that relied on new investor deposits to pay earlier investors. When the influx of new funds dried up, the fund’s value collapsed, wiping out Steam Finance’s investment and leaving the exchange with a net loss of $93 million.

The exchange’s internal communications revealed that the decision to invest was made by the senior portfolio manager, whose name was later revealed as Li Wei. Li had previously been involved in a similar incident at a rival exchange, PrimeX, where a high‑yield fund collapsed and caused a $45 million loss in 2022. Despite this, Li had managed to re‑establish a reputation within the industry before joining Steam Finance in early 2023.

Regulatory and Legal Repercussions

Following the announcement, the Hong Kong Monetary Authority (HKMA) opened a formal investigation into the exchange’s operations. The HKMA cited concerns over the platform’s “lack of a robust risk‑management framework” and its “failure to segregate client funds.” Simultaneously, the Securities and Futures Commission (SFC) announced it would assess whether Steam Finance had breached the Securities and Futures Ordinance (SFO) by investing client assets in a non‑registered fund.

In addition to regulatory scrutiny, the exchange faces potential civil suits from its users. A group of 250 plaintiffs, represented by the law firm Miller & Carter, has already filed a class‑action lawsuit alleging negligence, breach of fiduciary duty, and fraudulent conduct. The lawsuit demands full restitution of the users’ deposits, as well as punitive damages.

Industry Reactions

The cryptocurrency community has reacted with a mix of shock and caution. In a thread on the crypto subreddit r/cryptocurrency, users expressed concern over the apparent lack of transparency in Steam Finance’s operations. “I thought Steam Finance was a reputable platform,” wrote a user named CryptoSam. “Now they’re hiding behind a vague ‘investment loss’ explanation. I’m not sure I trust them anymore.”

Crypto analysts at Cointelegraph noted that Steam Finance’s withdrawal freeze could trigger a “domino effect” among other smaller exchanges, particularly those that rely on similar high‑yield investment strategies to boost liquidity. “If users start withdrawing en masse from other platforms fearing similar losses, we could see a broader liquidity crunch in the crypto market,” warned analyst Rachel Lee.

Steps Being Taken

Steam Finance has outlined a multi‑phase plan to address the crisis:

1. Liquidity Injection: The exchange is seeking a $50 million bridge loan from an undisclosed institutional investor to restore user confidence and meet short‑term obligations.
2. Independent Audit: A forensic audit will be conducted by EY, a globally recognized accounting firm, to trace the path of the investment and identify any internal failures.
3. Regulatory Compliance: The platform has committed to adopting a full set of AML/KYC procedures and to segregating client assets in a third‑party custodian account.
4. User Communication: Weekly updates will be posted on the company’s website and through official social media channels, detailing progress and timelines for reopening withdrawals.

Additionally, the company has set up a dedicated helpline and email address for user inquiries, with a promise of “personalized assistance” to those who have experienced losses.

Looking Forward

As the investigation unfolds, the crypto world will watch closely to see whether Steam Finance can recover from its $93 million loss and regain user trust. The event serves as a stark reminder of the risks associated with high‑yield investment products and the importance of transparent, well‑regulated exchanges. For users, the incident underscores the need for due diligence and a cautious approach to seemingly attractive investment offers.

If you’re a Steam Finance user, it is crucial to monitor the official communications channels for any new developments. Until the withdrawal freeze is lifted, it is advisable not to engage in additional transactions that could further expose you to risk.

Sources and Further Reading

• [ Steam Finance’s Official Statement ]
• [ HKMA Investigation Notice ]
• [ SFC Press Release on Steam Finance ]
• [ Coindesk Audit Report on Steam Finance ]
• [ Class‑Action Lawsuit Filed by Millar & Carter ]