2019 did not start off so well for Cryptopia. The New Zealand-based exchange got hacked for over $16 million in the beginning of the year. The stolen crypto has recently moved down in the exchange’s priority list since a third-party host is currently demanding $2 million in order to release customer data.
It’s natural that the stolen crypto amount is still a subject of debate since Cryptopia was actually hacked twice this year. The second attack was reported to have lost the exchange over 1600 ETH. Considering Cryptopia originally stated that the first attack was only worth $2 million in stolen crypto, the stolen 1600 ETH could prove to be a bit more.
These issues inevitably led to the company filing for bankruptcy in the United States. Liquidators working on collecting and redistributing the stolen crypto have encountered another issue.
The stolen crypto might just be gone already
It came as a shock to liquidators, but Cryptopia did not possess a database of its own. Apparently, the company hired a third-party host to store their entire data. Now, the third-party host, a US-based company, is terminating all agreements with Cryptopia and is also demanding $2 million for the customer data.
Cryptopia Limited appoints Grant Thornton as Liquidators – https://t.co/A35rq1Jls3
— Cryptopia Exchange (@Cryptopia_NZ) May 15, 2019
This puts the liquidators in a very uncomfortable position because they have to rely on the exchange to pay its debt. There is a potential risk of the entire data being overwritten and lost if the debts are not paid.
Cryptopia’s bankruptcy filing states that every account owner is a potential creditor in the liquidation process.
This is one of the many cases where the lack of professionalism and experience proved vital. The exchange initially started off as a hobby project back in 2014. During the best days of crypto in 2017, the exchange had over 300 000 users.
The attackers quickly became aware of the lack of security and made their move. Cryptopia initially filed a false report claiming that the stolen crypto was “only” worth $2.5 million. Combine that with the fact that the exchange was operating with over 300 000 accounts and no reliable database of its own and you have a recipe for disaster.
All these facts quickly spiraled out of control and the exchange is no longer operational. Future projects should look into the story of Cryptopia as a sound warning that mistakes get punished, harshly.
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