Grant Thornton, the liquidator of defunct New Zealand-based cryptocurrency exchange Cryptopia, today has provided an update on receivership proceedings, noting some positive developments. The exchange company, which was hacked earlier this year, could not recover from the fateful event, and in May had no choice but to wind up.
“We understand that Cryptopia stakeholders are keen to hear what progress has been made on the liquidation process in the last few weeks. Please find below a summary of what the liquidators have been doing to secure and preserve the crypto-asset holdings for the benefit of those entitled to them.”
– Grant Thornton NZ
Overview
The Grant Thornton team working on the case have now obtained Chapter 15 Bankruptcy Recognition in the United States. With the Recognition Order entered, certain protections apply to Cryptopia and its property within the territorial jurisdiction of the United States.
An “automatic stay” is effective and acts as a moratorium in favour of Cryptopia and its property within the territorial limits of the United States concerning pre-petition claims including litigation (whether class action or otherwise), creditor collection efforts with respect to Cryptopia’s assets in the United States, and efforts by contract counterparties to terminate contracts with Cryptopia.
A similar automatic stay against legal action is also in force under New Zealand insolvency law.
Determining Customer Holdings
These legal processes mean Grant Thornton has now recovered the customer holdings database from Phoenix. Initiatives are now underway to reconcile this with Cryptopia-controlled crypto-asset wallets.
“This is not a simple task as there are hundreds of thousands of customers and many hold multiple crypto-assets.”
Grant Thornton has begun and continues the process of recovering certain wallets which were established after the January hack and moving them into a “safe non-hacked environment.” The team reports that the requirement to undertake this task is also contributing to the complexity of the process.
The Grant Thornton team also continues to liaise with its legal advisors to determine how crypto-assets could be returned to customers. However, due to the January hack, this is a complex and time-consuming process. For example, an exchange that has been hacked cannot simply be reopened. There are certain legal requirements and obligations both in New Zealand and internationally that liquidators must meet, such as Anti Money Laundering/Know Your Client (AML/KYC) requirements when considering any repayment or return of assets.
Grant Thornton will continue to liaise with the New Zealand Police and other authorities internationally in relation to the January hack and other issues arising in connection with customers’ use of the exchange. Further updates will be provided in due time.
“We appreciate that Cryptopia customers want to know where the process is at and what it means for them and understand the concern they feel. While we are working as fast as we can to resolve the situation as we do not have answers to many customer questions at this stage.”
– Grant Thornton NZ
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