Cryptopia investors win battle over funds
Investors who had accounts with Christchurch-based digital currency exchange Cryptopia have won an unprecedented contest over funds held on their behalf.
Cryptopia went into liquidation in May last year after a $30 million hack in January 2019 pocketed about 15 per cent of its clients’ digital currency stock, made up of about 900 currencies, including bitcoin. It is regarded as the biggest theft in New Zealand history.
The exchange was holding cryptocurrencies worth about $170m and had 800,000 account holders with a positive coin balance.
The company’s liquidators went to the High Court at Christchurch in March asking for guidance on whether the account holders were entitled to all the currencies in their accounts or whether the funds were debts that ranked along with other creditors.
Creditors were owed about $12m, including Inland Revenue claiming about $5m. A decision for the account holders meant creditors would get about half of what they were owed.
In a judgment issued yesterday, Justice David Gendall found for the account holders, saying Cryptopia held the digital assets on trust by way of a separate trust for each cryptocurrency.
The requirements of an express trust were met in the way Cryptopia operated the exchange and handled the cryptocurrencies on behalf of the account holders, the judge said.
He recognised the unusual nature of the case, saying: ‘‘Counsel advise that to the best of their knowledge this is the first occasion on which issues of this type concerning cryptocurrency have been before the courts in New Zealand’’.
Liquidators David Ruscoe and Russell Moore of Grant Thornton have already spent $3m to secure the cryptocurrencies still in the exchange.
One bitcoin is worth about $14,500 at today’s rates.
Police were still investigating the theft, but were not saying whether they had narrowed the extensive pool of ‘‘persons of interest’’.
Detective Sergeant James Simpson said earlier that police were keeping an open mind as to who was behind the Cryptopia hack. ‘‘Is it internal? Is it an organised criminal group somewhere within New Zealand? Is it an international actor? It could be anyone.’’
He said the ‘‘unique, complex investigation’’ posed challenges for police, who ‘‘haven’t dealt with anything like this before’’.
The exchange was started by two young programmers and gamers, Rob Dawson and Adam Clark, in 2014. The business grew rapidly in 2017 and had 100 staff at its peak.
‘‘Is it internal? Is it an organised criminal group somewhere within New Zealand? Is it an international actor? It could be anyone.’’ Detective Sergeant James Simpson