Cryptopia, the now-defunct New Zealand-based cryptocurrency exchange, released an update for its customers on 27 May 2019. Along with the update, the exchange also released a copy of the United States Bankruptcy Court of New York approving the firm’s “emergency motion for provisional relief.” Notably, David Ian Ruscoe from Grant Thornton was appointed as the foreign representative of Cryptopia’s liquidation process by the New York Bankruptcy Court.
The court also released a statement pertaining to the exchange’s relations with Phoenix NAP, LLC, a global IT service provider. The service provider has control of around $110-$130 million worth of cryptocurrencies that belong to the exchange’s customers. For returning the digital assets back to the exchange, Phoenix demanded a payment of around $1.9 million, post terminating the service agreement.
This was however countered by the exchange, which offered to pay its monthly due of $137,000 for its services. Since the agreement was terminated by Phoenix, the exchange had no access to servers or information to the data saved in those servers, which hindered its liquidation process.
In a blog post, Grant Thornton stated,
“On Friday 24 May 2019, we filed a petition in the Bankruptcy Court in the Southern District of New York (SDNY) seeking recognition of the New Zealand liquidation in the USA, and we also applied for urgent interim relief. We took these steps to preserve the Cryptopia information that is stored and hosted on servers with an Arizona based business.”
The main concern, according to the exchange, was that “any failure to pay the amount demanded will result in PNAP overwriting data owned by Cryptopia, which would be nothing short of catastrophic for Cryptopia’s account holders and the administration of the New Zealand liquidation,” stated a court document.
Further, the exchange platform was not provided any information as to why the $1.9 million claim was made by PNAP.
The court document stated,
“As security for this temporary restraining order, the Foreign Representative shall pay Phoenix NAP, LLC the sum of $274,408.92 for services for the months of May and June 2019. Such sum shall be paid on or before 5:00 PM, May 31, 2019. This court shall retain jurisdiction to hear and determine all matters arising from or related to interpretation or implementation of this order.”
Grant Thornton added that “the process of recovering data” and deciding the distribution process would take “some months.”
Jabed Aktar Ahmed, a Twitter user, stated,
“Shame Cryptopia! A crypto exchange that not maintain their database, that maintains another company!”
@Orangemammba, another Twitter user, stated,
“Do not forget for transaction history data! You have not mentioned this anywhere and that scares me. Without these data, the holders will not be able to prove the source of funds to the tax office and will therefore pay an enormous amount of tax! (80% for our country)”
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Priya is a full-time member of the reporting team at AMBCrypto. She is a finance major with one year of writing experience. She has not held any value in Bitcoin or other currencies.