The barely regulated world of cryptocurrencies has undeniably has its risks, and people are only realizing it when their crypto deals go sour or when the crypto exchange becomes bankrupt. The lesson was learned the hard way by the user of the hacked crypto exchange company Cryptopia when the company announced this week that they are selling their assets for them to recover from the significant loss they experience after their system was attacked earlier this year.
The news was announced Wednesday by the company’s assigned liquidator, professional services firm Grant Thornton New Zealand. The company confirmed the news through a post on their Twitter account as well as on its website.
The announcement follows the unexpected shutting down of Cryptopia’s website on Tuesday for being “under maintenance” without any warning to their users or the public on its social media accounts. A Redditor noticed the downtime in the company ‘s website and asked whether hackers once again targeted them.
The unfortunate incident started when Cryptopia went offline on January without any warning only to notify the public after a few weeks saying that the exchange had “suffered a security breach which resulted in significant losses.”
According to a blockchain data analytics firm, their investigation allowed them to estimate the loss caused by the cyber attack to be as much as $16 million in ether and ERC-20 tokens. While the company has restarted their trading services in March, no one is still certain of the actual damages that the cyber attacked caused the company. Until now, the company is still recovering from the aftermath of the breach and still having banking issues.
According to the liquidation firm, Grant Thornton, since the damages caused by the hacking was too “severe” and has impacted the company massively in terms of trade, and amidst the effort of its management to regain composure by reducing costs and returning the business to profitability, they have decided that liquidation is the best option for the company and all stakeholders moving forward.
David Ruscoe and Russell Moore from Grant Thornton will help Cryptopia secure its assets “for the benefit of all stakeholders,” according to today’s announcement.
“While this process and investigations take place, trading on the exchange is suspended,” Grant Thornton said, adding that the complex investigation will take “months rather than weeks.”
Understandably, Cryptopia’s customers have expressed frustration over the fact that they were still not able to withdraw from their accounts since the hacking occurred. Some of them are even calling for creditors to organize and take legal actions against Cryptopia.
As a response, Ruscoe promised that his firm would conduct an investigation and do their best to come up with the best solution for all stakeholders.
“We realize Cryptopia’s customers will want to have this matter resolved as soon as possible. We will conduct a thorough investigation, working with several different stakeholders, including management and shareholders, to find the solution that is in the best interests of customers and stakeholders.”
What happened to Cryptopia is only one of many instances that highlighted the critical sentiments against cryptocurrency. Another crypto exchange company, Quadriga CX, has been in hot water in the past few months when the company could not pay $200 million – worth of funds to their customers following the death of their Chief Executive Officer.
CEO Gerard Cotten died last December and brought with him all the digital assets of the company including passwords and encryption keys of the cold and hot storages where the funds were supposedly kept for safety. However, the investigation by the monitor appointed by the court, Ernst & Young, revealed that the company owes more money than it owns.
The report reveals that Quadriga CX only has $20 million plus in assets while it owes more than $200 million. While the company maintains that there are more assets in cold storages or offline “wallets,” EY was still not able to verify the claim except when some of the Quadriga funds were questionably transferred from one hot wallet to several addresses.
Until now, the company is still trying to figure out how to repay 115,000 of their customers, and they are currently in the brink of bankruptcy.
Meanwhile, Grant Thorton is expected to file an initial report on the case next week on the New Zealand Companies Office website.