For many years Cryptopia was one of the most popular exchanges for small cap cryptocurrencies and the biggest crypto exchange in New Zealand until in early 2019 $17.8 million was stolen in a hack. The hack and lost money was a bad situation, but the government made the situation much worse.
Cryptopia originally wanted to continue operating its exchange, and to pay back the hacked funds over time via profits from the exchange, which is a plan that could have worked.
However, the police forced the exchange to close on day 1 of the hacking incident, and Cryptopia was never allowed to re-open. Eventually, the courts decided that Cryptopia would be liquidated, and placed Cryptopia’s funds in the hands of Grant Thornton.
To put things in perspective, although Cryptopia lost $17.8 million in the hack, $100 million of user’s funds remained.
Grant Thornton’s only job was to return funds back to the rightful owners, but Grant Thornton failed miserably. Instead of simply returning funds to the users, Grant Thornton tried to return funds to Cryptopia’s creditors.
Essentially, Cryptopia itself had taken out some loans and was in debt, and for a time Grant Thornton seriously considered giving user’s funds to the creditors to pay off debts.
This of course would be stealing, since the funds are the property of the users, and not the property of Cryptopia, and therefore the funds could not be used to pay off Cryptopia’s debts.
It took over a year for the courts to determine that giving user’s funds to Cryptopia’s creditors is illegal, which is totally insane, since it is so obvious. That being said, even though this decision was handed down in May, Grant Thornton has not returned a penny to users.
Now Grant Thornton is saying that the ‘registration process’ for returning user’s funds will open by the end of the year, and this is an extremely vague statement, since it gives no indication as to when any funds will actually be returned. Indeed, the way things are going, it may take years for users to get their funds back.
Thus, the real Cryptopia catastrophe is how the government appointed liquidator Grant Thornton has been holding $100 million of user’s funds for years without returning a penny, and this situation is far worse than the $17.8 million hack which caused Cryptopia to be forced out of business in the first place. Essentially, in this case the government, the courts, and the liquidator are worse than the hackers.