1 Jun 2019

Cryptopia liquidators seek advice from courts as to how to pay back customers

5:18 pm on 1 June 2019

Liquidators for hacked cryptocurrency exchange Cryptopia need legal advice from the courts as to how to repay out-of-pocket customers as there is no legal precedent anywhere in the world.

bitcoin onecoin ripple on wooden background and copy space, cryptocurrency money exchange investment concept.

Photo: 123RF

The Christchurch-based exchange was hacked in January, with millions of dollars' worth of virtual currency syphoned from its digital wallets.

Liquidators David Ruscoe and Russell Moore from Grant Thornton released their first report today, which said Cryptopia's liabilities totalled $4.2 million.

Its assets total $1.7 million

A court order was obtained this week enabling them to use Bitcoin held by the company to fund the liquidation.

Mr Moore said there was no legal precedent on crypto assets, so the distribution of Cryptopia's assets - and the overall conduct of the liquidation - would require significant direction from the courts.

"As liquidators, we have a responsibility to protect and preserve crypto-asset holdings for the benefit of those entitled to them.

"We are aware of and understand the frustration of Cryptopia's customers."

He said they had also taken steps to secure the company's assets and filed a petition in the Bankruptcy Court in New York to preserve the Cryptopia information stored on servers in the United States.

In 2017, the company claimed to have 30,000 users around the world but according to the report had 2.2 million users at the time of liquidation.

When the hack was discovered in January, Cryptopia closed the exchange for trading.

It was decided in March to reopen the exchange for the trade of certain crypto-assets and the company continued to trade through to May.

However, trade volumes were insufficient for the company to meet its debts and it was decided the appointment of liquidators was the best option.

Cryptopia had 100 staff at its peak and was the only trader of obscure, niche crypto-currencies in New Zealand.

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