Bitcoin exchange in police lockdown
Police have stormed the office of a Christchurch cryptocurrency trader after it lost what appears to be millions of dollars worth of currency in a security breach.
Cryptopia’s Colombo St headquarters were under police lockdown yesterday after a ‘‘significant amount’’ of cryptocurrency is thought to have been transferred at the trader without authorisation.
Some staff gathered in the upstairs car park as others were questioned by police.
An officer was visible in the second-storey window of the office. Another stood in the foyer behind locked sliding doors.
Investigators flew down from Wellington yesterday morning, police said.
A police statement said officers were told late on Monday of ‘‘an issue involving potential unauthorised transaction activity’’, and police were taking the matter ‘‘very seriously’’.
A spokesman for the Financial Markets Authority (FMA), New Zealand’s capital markets regulator, said Cryptopia reported the breach to it yesterday morning.
‘‘We will be engaging with the firm and the police.’’
The FMA did not regulate Cryptopia or the cryptocurrencies that it trades, but those providing a financial service related to cryptocurrencies needed to register on the Financial Services Providers Register.
The FMA has received complaints about Cryptopia in the past. These were either forwarded onto a dispute resolution service or Cryptopia customers were told about the process for making a complaint, he said.
Easy Crypto co-founder Janine Grainger said the Cryptopia incident did not do the cryptocurrency market any favours.
‘‘Part of the problem is it’s a very young industry so hacks like this are fairly commonplace.’’
She said there had been reports by blockchain transaction monitoring accounts on social media that the Cryptopia transfer involved two transactions worth US$3.6 million (NZ$5.3 million) combined.
One was for US$1.2m of a cryptocurrency called Centrality. That equates to 48 million tokens.
The second was for US$2.4m in Etherium, or about 19,000 tokens.
She said it was unlikely the tokens would be found, because there were so many exchanges they could be traded through.
‘‘I would imagine whoever has taken these funds is very good at hiding their tracks.’’
She warned cryptocurrency investors to be careful where they store their funds. They should be kept in ‘‘cold storage’’, a secure system that is not connected to the internet, such as a USB drive.
Adam Lyness, who worked as Cryptopia business development manager until November, said he did not have details other than what was in the public domain.
He said when he left Cryptopia it had about 100 staff.
However, Companies Office records show Lyness owns a third of Intranel Consulting, which owns a quarter of Cryptopia.
The crisis began unfolding late on Sunday, when Cryptopia tweeted it was experiencing ‘‘unscheduled maintenance’’.
On Monday, it posted a statement to Twitter saying it had suffered a ‘‘security breach’’.
The exchange had been put into maintenance while staff assessed the damages, it said.
Staff then notified ‘‘the appropriate Government agencies ... [T]he Cryptopia Exchange will remain in maintenance mode, with trading suspended.’’
Cryptopia was founded by Rob (Hex) Dawson and Adam Clark as a hobby three years ago. It now has more than 1.4 million users.
It offers trading in a number of cryptocurrencies, including Bitcoin, Litecoin and Doge.
Dawson’s father, Pete Dawson, is now the sole director and a 5 per cent shareholder of Cryptopia. Pete Dawson, who is the Canterbury Returned Services Association president, said police had told him to say nothing.
The company has 90 shareholders, most of them with a less than 1 per cent shareholding.
The main shareholders are Clark with 30 per cent, Dawson with 27 per cent and Intranel Consulting with 26 per cent.
‘‘I would imagine whoever has taken these funds is very good at hiding their tracks.’’ Easy Crypto co-founder Janine Grainger