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Following a major hack in mid-January that resulted in huge losses, the New Zealand based crypto exchange Cryptopia has gone into liquidation. David Ruscoe and Russell Moore from Grant Thornton New Zealand have been appointed as liquidators.
In January, Cryptopia was reported to have “suffered a security breach which resulted in significant losses,” with losses estimated to be around $16 million in Ethereum and ERC-20 tokens, as reported in February by Elementus, a blockchain data analytics firm. This was followed by a second attack, merely days after the first one. The second attack was aimed at around 1,7000 wallets, reportedly draining additional $180,000 in Ethereum. The combined attacks resulted in a 9.4% loss of total holdings within the first two weeks of January.
The cryptocurrency exchange restarted trading services in March, but a press release on the defunct Cryptopia website states that “Despite the efforts of management to reduce cost and return the business to profitability, it was decided the appointment of liquidators was, in the best interests of customers, staff and other stakeholders.”
A Twitter announcement saw a furious backlash from investors, who expressed dismay and discontent in the fact that Cryptopia had not allowed them to withdraw their funds after the hack. There has also been an uproar, calling to take legal action against the crypto exchange by frustrated investors.
David Ruscoe from Grant Thornton has made it very clear that subsequent investigations could take “months rather than weeks”, and that the hack has affected the company’s trade severely.
Cryptopia made the announcement following concerns from the customers, who speculated another hack, after redditor Fallenkeith2018 noticed the long unscheduled maintenance of the website raised his fear, and posted
“I woke up this morning to check Cryptopia to see if there was any updates on the website about new trading pairs. When I went to Cryptopia mainsite, it says: “Don’t Panic!
We are currently in maintenance.
Thank you for your patience and we apologise for the inconvenience.””
With customers and suppliers anxious to hear from Grant Thornton, David Ruscoe has said:
“We realise Cryptopia’s customers will want to have this matter resolved as soon as possible. We will conduct a thorough investigation, working with several different stakeholders including management and shareholders, to find the solution that is in the best interests of customers and stakeholders.”
There have been assumptions that the cryptocurrency exchange might be sold to a more successful competitor, and that the business will continue.
It is very unlikely that trade on Cryptopia will resume anytime soon, as the exchange stands suspended until investigations are over, and while the liquidators have plans to resolve the matter, it is not yet clear how they intend to do so. This places customers at a state of confusion as to whether they will ever see their funds again. There are some who have captioned this as an elaborate exit scam, as most customers are extremely pessimistic, given their current situation, and the fact that Cryptopia opened for business in spite of dismal conditions, allowed fund deposits to start trading again, and then closed shop without a warning.
The New Zealand media does not have much further to report, and the company’s Christchurch headquarters was described as a ‘deserted company building’ by media outlet Stuff. There have also been reports that employees were laid off in the last hour of its functioning days.
In any case, Grant Thornton will have to publish an initial report to the New Zealand Companies Office website by next week, as well as conduct a thorough investigation and secure assets. It remains to be seen what happens to the nervous customer community, and how they will be compensated.