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Update for Cryptopia account holders 20 August 2019

We have made good progress towards securing and preserving Cryptopia crypto-asset holdings for the benefit of those entitled to them. Below is an outline of the progress we have made since our last update on 3 July 2019.

Securing assets

We now have possession of Cryptopia data that was stored by a third-party data centre in the United States, and since the last update have been successful in accessing that data. This is a very pleasing step towards determining customer holdings, as the data contained the only records of Cryptopia’s customer holdings and certain crypto-assets were only stored on these servers.

As mentioned previously, we are now moving the crypto-assets which we have taken possession of, into a “safe non-hacked environment”. We are doing this as a precaution as the source of the January 2019 hack has not yet been determined.

The process was commenced by Cryptopia prior to Liquidation and is necessary to ensure that the data does not corrupt crypto-assets and other data which were not subject to the hack.

We also continue to work with the New Zealand Police and other authorities internationally in respect of the work they are doing to determine the source of the January hack.

Determining customer holdings

We appreciate that customers are wondering why it is taking so long for us to determine customer holdings. There are two main reasons for the time and complexity of the process:

  1. Customers did not have individual wallets and it is impossible to determine individual ownership using just the keys in the wallets.
    While Cryptopia held details of customer holdings and reported these on the Exchange, the crypto-assets themselves were pooled (co-mingled) in coin wallets. As a centralised exchange, users' trades would occur in the exchange's internal ledger without confirmation on the blockchain.
  2. No detailed reconciliation process between the customer databases and the crypto-assets held in the wallets has ever been completed. 
    To determine each customer’s holdings we must undertake a manual process to determine what is held in the pooled wallets and then reconcile the information with that held in the customer database. We are hopeful this process will show us the holdings of individual account holders. This process is well underway but will still take some time to complete. We are working to reconcile the accounts of over 900,000 customers, many holding multiple crypto-assets, millions of transactions and over 400 different crypto-assets). These must be reconciled one-by-one.

Hacked assets

We are still determining how we can, or if we can, recover crypto-assets that were hacked in January 2019. This is a complex situation with cooperation needed from third parties.

What happens next

While our reconciliation process is progressing well, we still require direction from the New Zealand Courts before we can return crypto-assets to customers. The information outlining the legal process included in the last communication are still current and is below.

We continue to liaise with our legal advisors as to the legal status of crypto-assets, the legal relationship between Cryptopia and its customers and to determine how crypto-assets could be returned to customers. However, due to the January hack, this is a complex and time-consuming process.  For example, an Exchange that has been hacked cannot simply be reopened. We have certain legal requirements and obligations both in New Zealand and internationally that liquidators must meet, such as Anti Money Laundering/Know Your Client (AML/KYC) requirements when considering any repayment or return of assets.

The KYC process cannot be avoided, it is a legal requirement in New Zealand, and prior to returning crypto-assets we will correspond with customers as to how this process will be completed. Please note, customers who have previously completed the KYC process with Cryptopia will still need to go through the process set by us.

Where to go for updates

We appreciate you want to be advised regarding our progress on the Cryptopia liquidation. We will continue to update you as further information comes to hand.