Liquidator of crypto exchange Cryptopia publishes first report

The liquidators for Christchurch-based crypto exchange, Cryptopia released their first report into the company’s affairs today. The liquidators from Grant Thornton are continuing the process, begun before the company was placed in liquidation, of recovering crypto-assets compromised from the hack of Cryptopia’s exchange.

David Ruscoe and Russell Moore of Grant Thornton have taken steps to secure the company’s assets and filed a petition in the Bankruptcy Court in the Southern District of New York to preserve data stored on servers in the US.

This week, the liquidators gained a Court Order from the New Zealand Courts allowing them to utilize certain crypto-assets to recover, preserve and protect assets. Yet, at this stage of the investigation, the liquidators cannot estimate a date for when the liquidation will be completed.

“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. As there is no legal precedent on crypto assets in New Zealand and worldwide, the distribution of those assets and the overall conduct of the liquidation will require a significant direction from the New Zealand Courts.”

In January 2019 Cryptopia’s exchange was hacked with a significant amount of crypto-assets taken. The company contacted the New Zealand Police and an investigation into the hack commenced. When the hack was discovered, Cryptopia closed the exchange for trading.

The company then decided to reopen the exchange for the trade of certain crypto-assets in March 2019 and continued to trade through to the date of liquidation. However, trade volumes were insufficient for the company to meet its debts as they fell due and it was decided the appointment of liquidators was in the best interests of customers, staff and other stakeholders.

Unsecured Creditors

Cryptopia’s electronic records indicate there are 69 unsecured creditor claims totaling $2.439 million. However, the liquidator expects that it will receive claims in excess of this amount.

Customers’ Holdings

Cryptopia held assets in wallets by cryptocurrency and has a database detailing the customer transactions and balance allocated to each customer. The liquidator is currently gaining access to the database to undertake a reconciliation of the holdings against the customer balances. Until the user balance database is reconciled with the crypto-asset wallets operated by the company, the liquidator cannot confirm the value of customer holdings.

A copy of the report can be found here.