Crypto

Liquidators Exceed $20M in Spending on Hacked Crypto Firm, While Clients Wait for Funds

Christchurch cryptocurrency exchange Cryptopia went bankrupt in 2019 by holding large amounts of bitcoin.

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Christchurch cryptocurrency exchange Cryptopia went bankrupt in 2019 by holding large amounts of bitcoin.

Customers of hacked crypto exchange Cryptopia are still waiting for their funds despite a four-year wait and $20 million already spent by liquidators.

Christchurch-based Cryptopia was liquidated by its shareholders in May 2019 after a drop in activity in 2018 and a disastrous hack in January 2019 who stole currency worth about $25-30 million, or about 15% of all customers’ funds.

The exchange held cryptocurrencies worth around $170 million and had 800,000 account holders with a positive coin balance.

The latest report from the liquidators – David Ruscoe and Malcolm Moore of Grant Thornton – shows that almost four years after the liquidation, not a single account holder has recovered their cryptocurrency despite the accounting firm having spent 20.3 million dollars for liquidation, including $5.78 million for its own costs and $3.4 million for legal fees. Unsecured creditors (those without a prior claim) owe nearly $3 million.

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Most account holders live overseas.

The liquidators’ expenses were mainly financed by the conversion of crypto-assets into current currency ($14.3 million) and the funds recovered ($5 million).

But, according to the report, the end seems to be in sight. The liquidators will seek court orders in the coming months seeking clarification on the funds that have not been claimed, the distribution model and setting a deadline for the receipt and assessment of claims.

In December 2021, the liquidators said the legal claims would be filed in the first half of 2022.

STUFF

Liquidators have locked down Christchurch-based Cryptopia. (Video first published in May 2019)

Since their appointment, the liquidators have had to rebuild the exchange’s infrastructure as the source of the original hack remains unknown and malicious code could still be embedded, the report said.

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They have hired international cybersecurity experts to secure the wallets (separate storage devices for each account holder) and transfer the assets to a secure environment.

“It was a complex and long process.”

Cryptopia’s administrative failures meant they had to rebuild wallets and corroborate transactions to ensure account holders had the correct balance, liquidators say.

Cryptopia founders Rob Dawson and Adam Clark oversaw a company with administrative failures, liquidators say.

-/Stuff

Cryptopia founders Rob Dawson and Adam Clark oversaw a company with administrative failures, liquidators say.

During the four years following the liquidation, the liquidators put in place processes for registering claims and verifying the identity of account holders. The final step involved having account holders agree to their balances. At the end of November last year, 72% of users contacted had confirmed their balance.

Many cryptocurrency owners who have banked on Cryptopia do not seem worried about claiming their coin.

“…there remains a significant amount of cryptocurrency allocated to account holders who have not yet participated in the claims process or identified themselves (sic),” the liquidators’ latest report states.

“Although we have made significant progress in the value claims process, we still have a large number of unclaimed assets.”

Liquidators say they continue to work with New Zealand police and international authorities to find the source of the hack.

Recovery actions had been filed in the United States, Malaysia and Singapore to track the movement of assets after the hack. They had also asked US law enforcement to lift the freezing orders so the stolen assets could be returned. So far, about $3,000 has been repatriated.

A stock exchange in Singapore had received a number of stolen assets and was cooperating. Legal action in Malaysia had stalled, the report said.

Ruscoe could not be reached.

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