CRYPTOPIA CASUALTIES: The people stung by a trail of debt

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Defunct crypto exchange Cryptopia, which suffered back to back hacks earlier this year, is currently in liquidation and owes nearly US$3 million [AU$4.32 million].

A new report from Grant Thornton New Zealand, the company handling the liquidation, details the current financial details of the exchange, which is massively in the red.

New Zealand

Lots of money owed

The liquidators state in the report that the overall financial details have not been fully verified, but the data shown so far shows creditors, staff, and investors are owed millions.

As of now, Cryptopia has two secured creditors, Dell New Zealand and Coca-Cola Amatil (NZ), which are owed $960,000.

There are currently 69 unsecured creditors that are owed $1.59 million by the now-defunct cryptocurrency exchange.

In addition, the exchange’s staff is owed $209,000 in outstanding pay and holiday wages.

As for the platform’s users, Grant Thornton is accessing the database given to them to begin a reconciliation of the holdings against customer balances.

Overall, the liquidators show that the New Zealand-based exchange has recoverable assets worth $1.12 million while facing $2.76 million in liabilities.

Cryptopia owes millions to its creditors.

Managing the liquidation

Grant Thornton is working with staff members of Cryptopia to recover cryptocurrencies from the exchange’s wallets in order to move them into cold storage.

In addition, the liquidator has filed a petition in the Bankruptcy Court in the Southern District of New York in order to have the New Zealand-based liquidation recognized as well as preserving Cryptopia data that is being stored on U.S. servers.

Grant Thornton also notes in their report that the New Zealand courts have given the okay to take Bitcoin being held in a Cryptopia wallet that lies outside of known client funds and convert it into fiat to help fund the liquidation effort.

One of the difficulties Grant Thornton is having in that there is an “absence of legal precedent on crypto-assets in New Zealand and worldwide,” which means it is looking for “significant direction” from the courts in how best to liquidate the exchange.

A victim of hacking

Cryptopia, which had 2.2 million users at its heyday, was impacted by several factors that eventually led to the exchange shutting down.

Grant Thornton notes that the exchange scaled up to meet increasing demand in early 2018, but the bear market of 2018 led to significantly decreased trading, which meant far less revenue.

Hack

The exchange had also entered into several expensive, long-term contracts to help fuel their scaling efforts.

Then in January 2019, a security breach resulted in the loss of roughly $16 million in Ethereum and other ERC-20 tokens.

A second hack hit the exchange a few weeks later that saw a further 1,675 ETH stolen.

Cryptopia shut down after the hack but reopened in March. Alas, the trade volume was not enough to sustain the business, which led to the decision to liquidate the exchange.

Police are still investigating the hack.