New Zealand-Rooted Cryptopia Exchange Looks For Bankruptcy Protection in the US Following Hack
Cryptopia, the New Zealand based crypto exchange which was hacked earlier this year resulting in a loss of around $16 million has filed for bankruptcy protection in the United States. The exchange went into liquidation earlier this month in order to compensate the stakeholders and investors.
The official liquidator for Cryptopia, Grant Thornton New Zealand revealed that the move has been taken to preserve the database of the exchange stored and hosted on the servers of an Arizona-based third-party firm. Cryptopia has been using third-party service providers for maintaining its database, and that tells a lot about the casual handling of operations at the exchange. Not many were surprised when it was discovered that Cryptopia does not have any backup of the data that was hacked, which led to many claiming that a hack was almost inevitable.
The bankruptcy court in the Southern District of New York granted Cryptopia an emergency motion for provisional relief till June 7. Grant Thornton said:
“The interim order preserves the Cryptopia data, which includes a SQL database containing all account holders’ individual holdings of cryptocurrencies and the account holder contact details. Without this information, reconciling individual holdings with the currencies held by Cryptopia will be impossible.”
The liquidation process requires the firm to confirm the holdings of various customer accounts and then repay the amount, but what would have been a tiresome task now looks near impossible as the exchange does not have any data backups on their own. The problem for Cryptopia does not seem to end there, even when the firm has filed for bankruptcy in the United States to keep the database secure, the money it owes to the third-party firm might lead to a complete loss of the data.
According to a report published in Bloomberg, the Arizona based firm working with Cryptopia has already announced its termination with the exchange and seeking $2 million in compensation. If the exchange is not able to pay the said amount, it might never be able to access the database of its users again.
Cryptopia Hack: A Serious Breach or Pure Negligence
Cryptopia was hacked almost at the start of the year in January, later the exchange tried to get back on its feet and resumed its trading services amid the investigation. However, only after a few months of resuming the trading services, it has to stop them owing to the banking issues and lack of capital to run the exchange. The firm stopped the trading services and went into liquidation earlier this month.
During the course of the investigation, it has come to the light that Cryptopia exchange which was started back in 2014 and gained popularity during the 2017 Bitcoin price peak. However, even after gaining popularity among customers the exchange did not really focus on making their operations streamlined and robust. The news about the lack of any data back up gives you an idea about the internal operations on the exchange.
Another rumor suggests that the private keys of important wallets were all stored on a single computer, and the hacker only had to get through that to hack the exchange and rob millions worth of cryptocurrencies.
Grant Thornton, the liquidator for Cryptopia was supposed to file an initial report on the case last week on the New Zealand Companies Office website. However, the New Zealand court granted a 10-day extension which has pushed the submission date for the report to June 4.