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  • L Higgins and M Bacina

Easter tidings as Cryptopia lays distribution plans

Cryptopia, a New Zealand-based cryptocurrency exchange, has received Court approval to begin returning cryptocurrencies to its users after being hit by a cyberattack in 2019. The now defunct exchange plans to distribute bitcoin (BTC) and Dogecoin (DOGE) to qualifying users within three months, with more distributions expected to follow.

This development follows a recent ruling in the company’s bankruptcy case by a New Zealand Court. Cryptopia detailed the claims process in an email to users, outlining steps to reclaim their assets. After the initial distribution, efforts will continue to return remaining cryptocurrencies by the end of 2024.

The exchange failed in 2019, losing USD$15.5 million of user holdings to a cyberattack. Trading services were suspended and a police investigation commenced. It was later revealed that the hacking took place between 14 to 17 January 2019.

Four months after the hack, the exchange announced it had appointed Grant Thornton as liquidator. A series of court hearings followed, including a landmark New Zealand High Court case brought by the liquidators to determine the legal status of cryptocurrencies held by Cryptopia and whether the assets were held on trust by the exchange. It was ultimately decided by the Court that crypto-assets were "a species of intangible personal property" and "an identifiable thing of value" that was capable of being held on trust.

During the liquidation phase in 2021 further losses occurred when a former employee pilfered USD $170,000 worth of crypto, adding salt to the wound. In the recent hearing, Cryptopia stated that it was exploring avenues to recover these stolen funds, including assets traced by the FBI.

The Court detailed the distribution plan in its orders at paragraph [58] of the decision:

  1. The claim valuation date for accountholders would be 14 May 2019 (the date the exchange went into liquidation);

  2. The liquidators are permitted to make distributions to accountholders who have registered their claim by a specific cut-off date;

  3. In relation to unclaimed holdings, the liquidators be permitted to make distributions to accountholders an amount by way of reimbursement of costs charged to such accountholders;

  4. A review process be established for accountholders unsatisfied with their claims (Order 3);

  5. There is no requirement to take any steps in relation to cryptocurrencies that have no or nominal realisable value (Order 4); and

  6. The liquidators be permitted to treat account holders who have an account balance equivalent or less than the actual or anticipated cost of the trust administration of the distribution as having no right to participate in the distribution (i.e. nominal claims) (Order 5).

After a journey down the rabbit hole marred by a cyberattack, theft and court proceedings, the hunt for returns looks to be nearing a close for Cryptopians users with distributions expected to commence this year.

By Luke Higgins, Steven Pettigrove and Michael Bacina


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