Cryptopia customers who had tokens on the platform when it finally succumbed to the wounds inflicted by a hack in January have been warned that there will be severe delays in receiving their tokens back. Cryptopia updated the home page of their website Monday to inform customers that they had officially filed for bankruptcy, noting that it will take “some months at least” for them to work out how to return customers’ tokens.
An update for Cryptopia account holders is now available: https://t.co/SXNYxaWEvi
— Cryptopia Exchange (@Cryptopia_NZ) May 27, 2019
Customer Repayment to Take Some Time
Cryptopia suffered a prolonged hack in January which saw the exchange closed for over two weeks, but by March it looked as if it was on the path to re-opening. However, a sudden ceasing of operations two weeks ago spelt trouble for both the owners and customers, and Monday’s notice confirmed those fears.
Cryptopia state that the bankruptcy filing was done in order to preserve the information stored on the company’s servers, including “a SQL database containing all account holders’ individual holdings of cryptocurrencies and the account holder contact details.” They also state that they are in the process of working out how to return customer funds, which will clearly take some time, although worryingly for customers the note also says that they are “seeking legal advice about our responsibilities in relation to the various currency holdings”, which could be read in a number of ways.
Database at Risk
Digging a little deeper into the bankruptcy filing reveals that the Cryptopia’s servers aren’t owned by the exchange, but are instead run by an Arizona-based outfit, who are trying to terminate their agreement and demanding $2 million into the bargain. Should the hosting company successfully close the account, the SQL database would be wiped and Cryptopia would be left with no knowledge of which customers own what, meaning paying them back would be almost impossible. This could result in a class action lawsuit or an equally messy way of trying to get customers to prove what they owned, similar to the Mt. Gox debacle.
If the company doesn’t receive the payment they could simply withhold the information, which would lead to a similar outcome. Being granted bankruptcy should go some way to protecting the information on the servers and would give Cryptopia’s administrators, Grant Thornton New Zealand, time to work up a rescue plan. Either way, former Cryptopia customers are at risk of missing out on the potential upcoming bull run if they don’t get their tokens back in time.