Cryptopia liquidators recover US$7M as case heads back to court

In a recently released report titled, ‘Liquidators’ Second Report on the State of Affairs of Cryptopia Limited New Zealand’, liquidators Grant Thornton has revealed that approximately NZ$10.9 M (US$ 7.15M) has been recovered since the liquidation began on the 14th of May 2019. The bulk of the funds relate to money located in a 3rd party trust account (NZ$5M) and NZ$4.4 million for the sale of 344 bitcoin located in a company wallet that a New Zealand court ruled was not connected to customer funds.

The case will return to court on February 3rd, 2020, as Grant Thornton has sought a court ruling on the legal status of crypto assets under New Zealand law. The question to be resolved is whether cryptocurrency is property – as it is described in the NZ Companies Act. A decision in this regard will determine whether crypto assets held in company wallets are the property of Cryptopia – or alternatively, must be held in trust for the benefit of Cryptopia account holders.

According to Grant Thornton, Cryptopia customers did not have individual wallets on the exchange, instead, all assets were pooled in company wallets and there was no reconciliation done between customer databases and the pooled wallets. Grant Thornton says it has only recently begun work on creating this reconciliation and returning user funds, but many legal issues will need to be resolved before this work can be completed.

At the time of its liquidation, Cryptopia had approximately 900,000 active account holders and was trading hundreds of different currencies. It is expected that Grant Thornton will make another announcement after February’s court proceedings – after that, there is no legal mandate for the receivers to make any further announcements until May 2020. At the time of the most recent report, approximately NZ$1.5M of the recovered funds have been spent on legal expenses and liquidator fees.

While Grant Thornton says it is continuing to work with New Zealand police in relation to their inquiries into the January 2019 hack of the Cryptopia exchange, no arrests have been made and the police have not made any media releases since early February 2019.

In other exchange hack related news, lawyers representing creditors of the failed Quadriga exchange have written to the Royal Canadian Mounted Police requesting that the body of deceased Quadriga founder Gerald Cotten be exhumed and autopsied “to confirm both its identity and the cause of death given the questionable circumstances surrounding Mr. Cotten’s death and the significant losses of affected users.”

Gerald Cotten died in mysterious circumstances in December 2018 while on a trip to India. Management at Quadriga said then that the keys to the company’s crypto wallets could not be found, as Mr. Cotten was the only one who knew where they stored. Losses for Quadriga users amounted to C$190M. Toronto based lawyers Miller Thomson have asked that Cotten’s body be exhumed before the start of the Canadian spring – due to concerns about “decomposition.”