Cryptopia users have been given a boost after a High Court ruled that all the funds recoverable by the exchange should be divided between account holders, not creditors. The judge in the case, Justice David Gendall, ruled that Cryptopia held the assets on trust, with each cryptocurrency representing a separate trust, which means that creditors are not entitled to funds held by users.
(1/2) Today, 8 April 2020, Justice Gendall delivered his judgement finding firstly, cryptocurrencies are “property” within the definition outlined in s2 of the Companies Act 1993 and secondly, that account holders’ cryptocurrency were held on multiple trusts, separated by …
— Cryptopia Exchange (@Cryptopia_NZ) April 8, 2020
A Long and Winding Road
Cryptopia was hacked in January 2019, leaving $170 million worth of tokens on the platform shared between 800,000 users. The platform went into immediate hiatus and shut down completely four months later.
Those with funds left on the exchange already knew it was going to take a long time for them to get their tokens back, but when creditors began piping up asking for their cut some months later, the process was further complicated.
Lengthy and Expensive Liquidation
The discovery by liquidators Grant Thornton that Cryptopia had kept all its funds in co-mingled hot wallets instead of assigning wallets to users meant that they had no choice but to embark on the arduous task of manually assigning funds to users.
The situation regarding the allocation of funds got so messy that Grant Thornton asked the Christchurch High Court for clarification on who was owed what, and received the answer yesterday – all the funds they could recover belonged to users, and creditors would have to seek other ways of getting their money back.
Victory For Users
This represents an all too rare victory for the user base, and with Grant Thornton requesting to waiver the current token allocation process in favor of a more streamlined alternative, users could yet see some of their money back this year – providing they are willing to identify themselves through the KYC processes that Cryptopia singularly failed to carry out.