Collapsed crypto exchange Cryptopia to start distribution to creditors

abdelaziz Fathi

Cryptopia, the New Zealand-based cryptocurrency exchange that fell victim to a cyber attack in 2019 and subsequently entered liquidation, has announced plans to start returning cryptocurrency to some of its account holders.

In an email sent to users on Thursday, Cryptopia outlined the first phase of distribution, which will see qualifying users receive their bitcoin (BTC) and dogecoin (DOGE) over the next three months.

The distribution initiative comes after a March 1 ruling in the company’s bankruptcy case at a high court in Wellington, New Zealand. The email assured users that the distribution process will adhere to approved procedures, with additional distributions planned before the end of 2024.

Cryptopia provided instructions in the email detailing who is eligible to make claims and how to do so. Users who contributed to hack recovery costs and those who had their funds stolen may be eligible to receive recovered crypto assets. The liquidators of Cryptopia, along with the exchange itself, can leverage assets recovered by the FBI for further tracing and recovery efforts.

The exchange’s troubles began in 2019 when $15.5 million was stolen from its platform, leading to its closure. In 2021, while undergoing liquidation proceedings, Cryptopia was targeted in another hack, this time by a former employee who stole $170,000 in cryptocurrency from a wallet linked to the platform.

More than four years on from the beginning of the liquidation process, liquidators Grant Thornton have yet to return any account funds to Cryptopia’s customers. The liquidation process which began in May 2019, following the all-encompassing exchange hack of January 2019, remains ongoing. Grant Thornton first began referring account holders to the Cryptopia claims portal in December of 2020.

The liquidators stated that as of June 2023, they are currently in stage 3 of the process. They are continuing to verify and finalize user balances and are in the process of pre-distributing owed assets. While they have indicated that they will file for distribution and anticipate the start of fund returns shortly, past delays have been experienced. In the liquidators’ report from November 2022, Grant Thornton anticipated that distribution and the onset of the fourth stage of liquidation would commence in Q1 2024. However, this did not materialize.

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