When Cryptopia went into liquidation in May 2019, few could have expected the complexity that would be involved in returning funds to users. However, ten months on, things aren’t all that much clearer than they were when the liquidator Grant Thornton took over, with the latest update making it clear that, far from things getting easier, in many ways they are getting more complicated.
Co-mingled Wallets
Grant Thornton were appointed to handle the Cryptopia liquidation process following the twin hacks on the exchange in early 2019 that left it incapable of continuing. They quickly found that Cryptopia used co-mingled wallets, which meant that users’ funds weren’t kept separate from each other, which led to Grant Thornton having to try and manually reconcile user accounts with amounts left in the wallets.
This was further hampered by the revelation that the customer data was held on a virtual server by a hosting company in America, who demanded $2 million to return the data. This was ironed out and the data returned, which allowed Grant Thornton begin the arduous reconciliation process, but not before discovering that Cryptopia were in breach of Anti-money Laundering regulations, to absolutely no one’s surprise.
Grant Thornton Requests Procedural Change
In the latest update, posted last week, Grant Thornton illustrated the complexity of the problem:
Liquidators have not been able to ascertain whether Cryptopia’s actual cryptocurrency holdings, in the hot and cold digital wallets held by it, corresponded with the verified coin balances of account holders, as recorded in the SQL database, at any given time.
They add that there is “no certainty as to when the reconciliation process might be complete”, and ask Christchurch High Court, where the case is being heard, to waive the usual process of individual ownership levels before moving to the next step.
The court has yet to respond, but failing to accede to Grant Thornton’s request will likely see no resolution for out-of-pocket token holders for months or years, with costs escalating with each passing day.
