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Grant Thornton updates Cryptopia account holders

Grant Thornton’s David Ruscoe and Russell Moore were appointed liquidators to the failed New Zealand-based Cryptopia in May, filing a petition in the Bankruptcy Court in the Southern District of New York to preserve the Cryptopia information stored on servers in the US. Grant Thornton has now issued an update on the process saying that it has ‘made good progress towards securing and preserving Cryptopia crypto-asset holdings for the benefit of those entitled to them’.

The liquidators say: “We now have possession of Cryptopia data that was stored by a third-party data centre in the United States, and since the last update have been successful in accessing that data...

“As mentioned previously, we are now moving the crypto-assets which we have taken possession of, into a ‘safe non-hacked environment’.

“We appreciate that customers are wondering why it is taking so long for us to determine customer holdings. There are two main reasons for the time and complexity of the process:

  • Customers did not have individual wallets and it is impossible to determine individual ownership using just the keys in the wallets. 
  • While Cryptopia held details of customer holdings and reported these on the Exchange, the crypto-assets themselves were pooled (co-mingled) in coin wallets. As a centralised exchange, users' trades would occur in the exchange's internal ledger without confirmation on the blockchain.

The liquidators now need to undertake a manual process to reconcile the customer database with the crypto-assets held in the wallets. They are also still working on whether they will be able to recover crypto-assets that were hacked in January 2019.

It is unlikely that Cryptopia customers will see their funds any time soon. “We continue to liaise with our legal advisors as to the legal status of crypto-assets, the legal relationship between Cryptopia and its customers and 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. We have 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.”

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