Court Classifies Crypto As ‘Property’ After Cryptopia Exchange Hack; Funds Returning to Users
The High Court of New Zealand ruled on April 8, 2020, that the cryptocurrencies are beneficially owned by the account holders and aren’t the assets of the company, on the basis that cryptos are “property” under Companies Act and cryptos were held on multiple trusts.
Formed in 2014, the New Zealand-based exchange Cryptopia, suffered a hack last year and lost $30 million worth of crypto assets. Then in May 2019, it was placed into liquidation. The exchange enabled its clients to trade about 900 crypto assets, more than any other exchange at the time.
As per liquidators, the exchange currently holds cryptocurrency worth about NZD 170 million, over 100 million USD. The liquidators at Grant Thornton have spent as much as $1.8 million to secure the digital currencies on the exchange.
As such, it’s to be seen how much will be distributed to the account holders as the fees for the liquidators and counsel for account holders and creditors are to be met from the pool of realized bitcoin holdings. Liquidators have been seeking to know what are the assets in the liquidation and the distribution of the company's assets.
Now, as per the Judge David Gendall, Cryptopia held the crypto assets via trusts for each cryptocurrency and they are beneficially owned by the account holder and not the company. The Judge acknowledging the unique circumstances of the case said,
“Counsel advises that to the best of their knowledge this is the first occasion on which issues of this type concerning cryptocurrency have been before the courts in New Zealand.”
As per the ruling, all of the digital assets have been constituted as “property” under s2 of the Companies Act. As for how the recovered stolen digital assets will be dealt with by the liquidators, they will be dispersed on the basis of “pro rata within each specific trust for the digital asset concerned according to the amounts recovered assessed against the amounts stolen.”