Crypto exchange Cryptopia users get big win in court

Account holders who lost money as a result of last year’s Cryptopia exchange just won a battle for the remaining funds held by the now-defunct exchange.

The New Zealand-based exchange went into liquidation in May 2019 following the theft of NZD $30 million ($17.85 million) worth of cryptocurrency.

Shortly after the hack, asset recovery firm Grant Thornton was appointed as liquidators for Cryptopia’s assets, and recently sold off the exchange’s physical goods in an online auction. However, the firm was unable to directly return any money to investors before it clarified with the courts on how the funds should be divided between affected parties.

As part of the restitution process, Cryptopia investors were separated into two categories: creditors who had directly invested money into the exchange, and account holders who simply held their money on the platform.

Creditors, including shareholders and New Zealand’s tax authority The Inland Revenue, are owed close to $12 million (USD), while account holders are owed over $100 million (USD).

According to a document released by the liquidators on Wednesday, a judgment made by Justice David Gendall at the High Court in Christchurch found in favor of the account holders. As a result, the creditors will only receive around half of their dues.

Because the exchange operated as a trust by handling the cryptocurrencies on behalf of the account holders and holding these in separate trust accounts, Justice Gendall took the view that the digital assets should be classed as property.

Justice Gendall said, “I reach the conclusion that the cryptocurrencies here situated in Cryptopia’s exchange are a species of intangible personal property and clearly an identifiable thing of value. Without question they are capable of being the subject matter of a trust.”

It still remains unclear who was behind the theft or how they pulled it off. However, Cryptopia founder Adam Clark suspects it was an inside job designed to sabotage the company.

“A hacker somehow knew where everything was. Someone walked in with all the keys and deleted the logs on the way out,” Adam told Stuff, adding “They didn’t take the untraceable currency. It wasn’t about spending the money, it was about fucking the company. They had direct access.”

The investigation is still ongoing.

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