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New Zealand Court Gives Guidance on Distribution of Recovered Cryptopia Funds 

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New Zealand Exchange Cryptopia Has Direction Hearing Rescheduled to February
New Zealand Exchange Cryptopia Has Direction Hearing Rescheduled to February

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There’s been a new update in the liquidation process for hacked New Zealand cryptocurrency exchange Cryptopia after a judge delivered a verdict on the status of the exchange’s compromised assets. As the exchange announced on Twitter earlier this week, the High Court of New Zealand has ordered it to reimburse its users who lost their holdings as a result of the hack.

Customers Get Top Priority Over the Company

Cryptopia’s hack was one of the most prominent of 2019. The security breach happened in January, with over $16 million being taken from the exchange’s wallets. After several rounds of social media investigations, it was discovered that over 20 different digital assets were stolen. Since then, however, the exchange has been unable to get back on its feet and has been working on reimbursing its users who were affected as a result.

In today’s verdict, Judge Grendall of the New Zealand High Court revealed that users’ assets on the exchange were maintained by multiple trusts, with each maintaining the funds of users who held a specific asset. This means that the account holders in each group were treated as the co-beneficiaries of the trust.

The judge also firmly reiterated that cryptocurrencies are a species of intangible personal property, and as such, are an identifiable thing of value. Given their classification as property, assets are capable of being the subject of a trust.

Thus, if the exchange’s liquidators succeed in recovering the assets, they should deal with them pro-rata within each specific trust and ensure that the users who lost their funds are adequately reimbursed. The judge also determined that the pool of assets available to creditors should be about NZD 5.4 million ($3.22 million).

Problems with Customer Identification

The judgment also covered a case where the assigned liquidator, auditing giant Grant Thornton, is unable to ascertain the identity of a specific account holder. In such cases, the digital assets in question should be distributed by following New Zealand’s Trustee Act.

The judgment is quite crucial, as Grant Thornton announced in a news release last August that some Cryptopia customers had their funds pooled together and didn’t have any individual wallets. Due to this, the auditing firm explained that it was unable to determine the individual ownership of wallets by just relying on their keys.

Grant explained that it would try to “reconcile the accounts of over 900,000 customers, many holding multiple crypto-assets, millions of transactions, and over 400 different crypto-assets […] one-by-one.”

Grant Thornton updated investors last December, confirming that it had discovered over $7 million of the stolen funds. “We continue to investigate the affairs of the Company and its directors in the period prior to our appointment to determine if there are any further avenues of recovery available to the Company,” the company’s report summarized at the time. 

However, the firm also didn’t say much about how long it will take before outstanding investors get their money back.

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