Cryptopia Users Win Victory in Court Case Over Crypto Assets Worth Over $100M

In the fallout from a massive hack of the New Zealand cryptocurrency exchange, users at last have a little good news.

AccessTimeIconApr 8, 2020 at 9:10 a.m. UTC
Updated Sep 14, 2021 at 8:26 a.m. UTC

In the fallout from the New Zealand cryptocurrency exchange Cryptopia, users at last have a little good news.

In a court ruling over how the remaining crypto assets will be distributed, Justice David Gendall at the High Court in Christchurch said users of the exchange are entitled to the assets they hold in Cryptopia accounts, deciding they should be classed as "property" as they were held in separate trust accounts.

An alternative ruling would have seen the assets classed as normal debt to be distributed among both users and creditors.

Justice Gendall described the case in a document published on Wednesday, saying: "Effectively, the tussle which is before the Court is one between the creditors of Cryptopia on the one hand and the accountholders who have invested in the various digital assets (“the accountholders”) on the other."

The company had over 800,000 users with positive balances that would need to be reimbursed, but 37 creditors and 90 shareholders have also been vying for their stake in the remaining assets of the company.

Following the hack in January of last year, it was discovered Cryptopia had lost around NZ$30 million (US$17.85 million) in various cryptocurrencies – funds that are still missing with police still not having disclosed if they have any real suspects.

The breach left crypto assets worth around NZ$170 million (US$101 million) held by the exchange. Grant Thornton New Zealand, which was assigned to oversee the firm's liquidation process last May, is still trying to ascertain the details of which users held which cryptocurrencies due to poor record keeping at Cryptopia.

Also disclosed in the filing, creditors would likely end up with a share of other Cryptopia funds to the value of NZ$5.4 million (US$3.2 million). That's less than half of the claimed NZ$12.7 million (US$7.5 million), of which New Zealand's tax department also seeks NZ$5 million (US$2.9 million).

With lawyers representing the creditors and the exchange users both taking different stances on the key issue of whether the crypto assets are indeed property (the creditors said they are not), Justice Gendall ultimately said: "I reach the conclusion that the cryptocurrencies here situated in Cryptopia’s exchange are a species of intangible personal property and clearly an identifiable thing of value. Without question they are capable of being the subject matter of a trust."

"The argument that cryptocurrency is mere information and therefore it is not property is a simplistic one and, in my view, it is wrong in the present context," he added. "I dismiss it."


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