2019 started with Cryptopia’s consecutive hacks, during the course of which around $30 mln in crypto was lost. The total amount of 170 mln NZD in various crypto assets remained on Cryptopia’s accounts after those attacks ($101,198,450).
Later on, in May, the crypto exchange announced that it was going into liquidation. Now, Cryptopia has taken to its official Twitter account to announce the recent verdict of the court.
The court’s decision
Cryptopia addressed its users who have been looking forward to the outcome for a year now and shared a 74-page court document with them, saying that all the assets belong to the account holders, not the company.
(2/2) ... individual crypto-asset type. This means that the cryptocurrencies are beneficially owned by the account holders and are not assets of the company. Read the full judgement here: https://t.co/ceUywTVdFY— Cryptopia Exchange (@Cryptopia_NZ) April 8, 2020
However, the court’s document states that all cryptocurrencies on Cryptopia were held in special trusts (each trust is for each type of crypto) created for the holders’ benefit and that account holders are the co-beneficiaries of those trusts.
“the digital assets are held in multiple trusts for the benefit in each case of specific groups of accountholders who hold that particular group or type of digital asset with the result that accountholders within a specific group are co-beneficiaries of the same trust.”
Cryptopia, the document states, acted only as the trustee in this case.
“Cryptopia essentially fulfilled the role of a bare trustee in relation to the accountholders. Cryptopia’s trust duties therefore were somewhat confined. Its principal role was to hold each group of digital assets as trustee for the accountholders, to follow their instructions, and to let individual accountholders then increase or reduce their beneficial interest in the relevant trusts in accordance with the system Cryptopia had created for that purpose.”
Will users get their crypto back after all?
The court suggested the following solution:
“Question (f) asks if, and to the extent that the applicant liquidators recover stolen digital assets, how are these to be dealt with by the liquidators? The answer is as outlined at para (f)(ii) to the effect that they are to be dealt with pro rata within each specific trust for the digital asset concerned according to the amounts recovered assessed against the amounts stolen.”
Cryptopia itself did not give any direct interpretation of the court’s decision, but only shared the document, letting users make conclusions themselves.
However, if some are happy, expecting their crypto to be returned soon, others are suspecting that they will not receive any of their funds since there is a line in the document that speaks of “the liquidators being unable to ascertain the identity of any particular account holder”.
“On this question (e) which relates to the consequence of the liquidators being unable to ascertain the identity of any particular accountholder and what consequences should follow in relation to digital assets associated with that account, the answer is that these digital assets fall to be dealt with pursuant to s 76 of the Trustee Act. The requirements set out in that provision are to apply here.”