Mystery of Cryptsy's Collapse Grows as CEO's Whereabouts Unknown
One month after a Florida court first appointed a receiver in charge of troubled digital currency exchange Cryptsy, the representative has filed a report detailing efforts to retain information about the whereabouts of Cryptsy assets, as well as CEO Paul Vernon.
Entered by receiver James Sallah, the filing comes months after users first began voicing concerns about their inability to withdraw funds from the exchange or receive clarity from its management on the status of such services.
Back in January, two Florida law firms filed suit against Project Investors, the company that oversaw the exchange's operation, just prior to the emergence of claims that Cryptsy had been hacked and robbed nearly a year and a half prior. At the time, Cryptsy claimed that it owed its customers millions in various digital currencies, denominated primarily in bitcoin.
Claims about the hack, widely disputed by both customers and critics, were kept hidden at the time to avoid a panic, Vernon told CoinDesk in January, but that dwindling income brought the extent of the exchange’s insolvency to the fore.
Court documents later revealed that the exchange’s failure was predicted weeks before its insolvency was publicly revealed. Vernon is currently believed to be residing in China, and according to recent reports, played a role in the creation of an altcoin exchange in that region.
In the wake of that collapse, according to the receiver’s report, is a lack of clarity regarding the location of customer funds – though some former users have been tracing transactions tied to Cryptsy and Vernon – as well as an apparent lack of communication or cooperation between Vernon and plaintiffs in the class action.
The report states:
"As of this First Report, I have not received any cooperation from Mr Vernon, so my job has been made much more difficult regarding every issue involving Cryptsy, especially wallet and investor information. From my investigation, accessing the servers will be critical to determine current and past account, wallet, investor and financial information and records."
Vernon did not immediately respond to a request for comment. Cryptsy is currently offline.
Despite the reported lack of cooperation between the two sides, court documents suggest that the plaintiffs have been pursuing avenues of restitution for former customers involved in an ongoing class action.
Notably, the report asserts that a Florida residential property tied to a recent divorce case involving Vernon was indeed purchased with funds tied to Cryptsy. Lori Ann Nettles, Vernon’s former spouse, was also named as a defendant in the class action lawsuit.
"I have also confirmed that the million-dollar plus property currently in Ms Nettles’ name ... was derived from Cryptsy and should be receivership property," the report states, going on to say that the house is currently on the market.
Sallah further indicated that he could file a separate lawsuit seeking possession of the home.
The report includes details on the exchange’s financial infrastructure, supported by bank accounts provided by TD Bank and SunTrust Bank, as well as digital currency accounts held by Coinbase and Bittrex, both of which have reportedly frozen funds tied to Cryptsy. Bittrex, for example, is said to have frozen an amount worth at least $100,000.
Sallah also detailed efforts to secure access to the Cryptsy servers, said to be hosted by a company called Vault Networks in Miami. According to the report, following court action Sallah was able to obtain a commitment to secure access as of last Friday.
Uncertain road ahead
As the report asserts, outstanding questions about the contents of the Cryptsy web servers and the extent to which funds left the exchange prior to its collapse remain unanswered.
"My overall investigation is still in its infancy and will be ongoing," Sallah wrote. "I will continue to search for and attempt to secur[e] funds, cryptocurrencies, accounts and wallets in Cryptsy’s name or derived from Cryptsy."
Speaking to CoinDesk, attorney David Silver of the Silver Law Group reiterated a past call for Vernon to cooperate with plaintiffs and said that efforts to gain control of assets and client funds remain ongoing.
“While we are trying to do everything we can to protect our clients’ interests, we are limited in what we can do,” he said. “Members of the Cryptsy community have been actively following this case, and any help or information they can provide is much appreciated.
The full report can be found below:
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