Cryptopia publishes update on reimbursements, reconciliation

Earlier this year, the Cryptopia cryptocurrency exchange in New Zealand was hit by a massive attack that reportedly saw it lose $15 million in held funds. That forced the company into bankruptcy, and it has, ever since, been trying to put all the pieces together in order to sell off assets and distribute the liquidity to creditors. While progress has been slow and painful, the company overseeing Cryptopia’s activity, Grant Thornton, just released an update a few days ago on where things stand and what’s going to be coming in the next couple of months.

The most recent update provided before last week’s announcement was on August 20. Since then, Grant Thornton has been busy in court, trying to receive better direction on the legal status of Cryptopia customers’ holdings and whether or not it can legally hold digital assets in trust. It has also requested, and been approved for, oversight by two legal representatives from the “Queen’s Counsel,” in order to help facilitate all movement going forward.

The latest update for #Cryptopia stakeholders is now available. The next statutory report is due in early December and we will provide a formal update on the liquidation progress via this report. https://t.co/t6VDnjcKDx

— Cryptopia Exchange (@Cryptopia_NZ) October 25, 2019

While the company figures out the legal aspects of its involvement, creditors are growing a little impatient. Grant Thornton recognizes and addresses this, saying in its announcement, “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, customers’ trades would occur in the exchange’s internal ledger without confirmation on the blockchain.”

There are reportedly 900,000 customers that Grant Thornton is sorting through in an effort to figure out who was holding which Cryptopia wallet, with some individuals possessing more than one. It adds there are “millions of transactions” and more than 400 crypto assets that it is trying to piece together in order to be able to move forward.

To help facilitate the process, Grant Thornton has devised a system it believes will speed things up. It has been able to recover assets and secured company data and has already rebuilt the full wallet environment in order to ensure there aren’t any traces from the 2019 hack. It is now working on identifying the users so that it can make restitution, but this is being complicated by legal challenges. The company didn’t provide details on what those challenges entail.

A lot of Cryptopia’s assets, including computer and office equipment, have already been sold and most of the proceeds added to reimbursement funds. As the company continues to work with legal advisors and the courts to ensure that it is operating within the framework of New Zealand’s laws, it will continue to move closer to being able to make restitution. For that final step to take place, users will have to review Know Your Customer (KYC) requirements and adds, “[This] process cannot be avoided, as it is a legal requirement in New Zealand. Before returning crypto-assets we will correspond with customers about how this process will be completed. Please note, customers who have previously completed the KYC process with Cryptopia will still need to go through the process set by us.”

The company plans on issuing a new update in December in accordance with its agreement to oversee the restitution process.