Cryptopia: Liquidators third report focuses on reconciliation process
After suffering a major hack in January 2019, cryptocurrency exchange Cryptopia confirmed going into liquidation in May 2019, with Grant Thornton firm as its liquidator. On 8 April, the High court had noted that cryptocurrencies are beneficially owned by the account holders and will not form part of the pool of assets available to unsecured creditors.
Since the legal relationship between the company and account holders has been validated, the liquidators now had a certainty about the holders’ claims o be in the form of cryptocurrencies, as per the third liquidators’ report. However, a claims process has yet to be established and the liquidators will communicate it. The liquidators have been working with several solution providers to develop a claims process and intend to agree on a provider soon.
Meanwhile, there has been continued work with the New Zealand police and international authorities to identify the source, however, the obligation of the company was to its stakeholders’. The report read:
“We are not investigating the root cause of the hack. Our obligation is to seek recoveries for stakeholders’ benefit. We have undertaken investigations to trace and or freeze stolen crypto-assets. “
The exchange has been investigating to track and freeze stolen cryptos and were discussing the same with exchanges that have frozen stolen assets. As per the legal decisions, the stolen cryptos that will be recovered has to be “applied to the specific trust associated with each cryptocurrency Crypto-Asset Reconciliation process/ Customer Holdings.”
The report claimed that it was unable to determine customer holdings as customers did not have individual wallets as it made it difficult to determine individual ownership using just the keys in the wallets. Apart from that, the lack of a detailed reconciliation process between the customer databases and the crypto-assets held in wallets added to the delay. The team has been working to reconcile the accounts of over 900,000 active customers but was hit due to the pandemic. With the lockdown declared to be over on 8 June 2020, the exchange is back on track and expected the reconciliation process to be completed in the coming months.
Once the process of reconciliation has been completed, the liquidators will have to re-visit the court and seek approval on its proposed distribution model to account holders. It will provide clarity on the shortfall in total cryptocurrency help per each trust.