Recently, Cryptopia, a New Zealand-based cryptocurrency exchange which previously experienced a large security breach, announced that they are going into a liquidation process. They have appointed David Ruscoe and Russell Moore from Grant Thornton New Zealand as the liquidators.
The result of a recent hack
Previously we reported that Cryptopia suffered from a hacker attack and for a brief moment it almost seemed like Cryptopia has lost all control over their Ethereum wallets. The exchange lost around 30k Ethereum and other assets. Since then Cryptopia had notified the New Zealand police and other legal instances.
After this, judging by their Twitter communication in mid-March, they entered a “coin securing” phase. Within this
Later, at the end of April, they stopped communicating for a couple of weeks. Then came out with the recent announcement about the liquidation process.
Users cannot withdraw funds because of an investigation
Cryptopia just published a “Liquidation FAQ” where they state:
“We are now undertaking an extensive process to confirm amounts owing and available to return to customers. This is a complex process and will likely require direction from the New Zealand Courts. Until the investigation has concluded we cannot return any crypto-assets to customers.”
Also, they claim that their first priority is to secure all crypto-assets on the exchange. But the weird thing is that they “need to confirm the amounts owing and available to return to customers”. And this process, as they say, is very complex and they need the direction of New Zealand courts “to make sure a fair legal solution is found”.
Went into liquidation because their debts fell due!
As they describe in their FAQ, Cryptopia’s main reason why they’re entering liquidation process is their situation with debt. Customers and Twitter users are commenting that one of the reasons why Cryptopia cannot answer anything about their customer’s assets is because they are thinking of covering their debts with customers money.
Every FAQ about customers assets ends with the same phrase: “Until the investigation has concluded, we cannot confirm whether individual customers will get all of their crypto-assets returned,” or “We cannot confirm any customer balances until we have completed our investigation,” or “At this stage we cannot confirm what will be returned or whether crypto assets will be returned as crypto-assets or fiat currency.”
Basically, they say that they know nothing about their customer’s assets, and they don’t guarantee that they will even get them back at some point.
Respectively, many users are really upset to hear this kind of response from Cryptopia. And they rush to conclusions such as Cryptopia is exit-scamming and stealing customers assets. But that seems like a logical response to what Cryptopia had explained. The exchange basically says that they got huge debt, and they won’t allow anyone to access their funds. Also, they don’t say whether customers will get their funds back. Whether or will they get them back at all, and they cannot even provide a reasonable timeframe.
Binance vs Cryptopia
As we recently witnessed, Binance also experienced a security breach. But the quality of communication and transparency that Binance offered cannot even be comparable to Cryptopia. First of all, you cannot even compare the involvement of Changpeng Zhao, the CEO of Binance, and Alan Booth the CEO of Cryptopia. Alan hasn’t tweeted since October 2018, and Cryptopia’s Twitter account isn’t a good example of communication as well. Binance ruled out multiple tweets a day, explaining everything and answering to almost everyone’s questions. But you sure can’t say that about Cryptopia! Since the announcement about liquidation, they have posted 3 tweets including the one with the announcement.
Funny enough, their CEO once in an interview to
“So, for us [Cryptopia], the first thing is trust. If people can’t trust your brand, and that means every part of it, you’re not going to succeed.”
It looks like they deliberately chose the path of not succeeding.
People are really frustrated.