$235 000 USD
DESCRIPTION OF EVENTS
"Cryptopia Ltd (Cryptopia) was a New Zealand cryptocurrency exchange basedin Christchurch. It delivered custodial services and operated as a full-featured spot trading platform for major cryptocurrencies, requiring users first to register their membership by opening an account and making a deposit. On completion of the registration process, Cryptopia would provide users with a positive coin balance in their online account and enable them to trade."
"Start trading the world's largest range of cryptocurrencies. Find out why over 2 million users love trading with Cryptopia." "Trading cryptocurrencies has never been easier. Our exchange is simple to use, fast and secure. Deposit, trade or withdraw all major coins, trading pairs and new currencies within minutes. With access to dynamic charts, live coin information, world class service and the world’s largest range of coins, Cryptopia offers users the best global transparent exchange platform to trade cryptocurrencies." "We deliver a high quality service for our users with premier support and fast response times." "Get early access to all the new and innovative coins that are listed on Cryptopia first." "We are ethically run from New Zealand, regulated by New Zealand law and a leading trusted exchange."
"While the number of registered users at Cryptopia remained relatively modest from 2014 to 2017, it grew exponentially with the rise in the price of bitcoin and in late  it surpassed 900,000. The business was global with investors in over 230 countries (New Zealand had the 26th largest number of account holders in Cryptopia) and more than 900 different cryptocurrencies traded on the exchange."
"At its height, the New Zealand-based exchange, now in liquidation following a disastrous hack in 2019, employed more than 80 staff while servicing 1.4 million customers globally." "At the date of liquidation, it had over 2.2 Million registered users worldwide and employed 37 staff. The rapid growth of Cryptocurrency in early 2018 meant the Company scaled up to manage the increased level of trading. To manage this the Company entered into a number of long term, high cost contracts to provide the infrastructure necessary to trade at this level. Unfortunately trade volumes, from which the Company earned its revenue, reduced significantly through late 2018. Accordingly, the Company then took steps to reduce its expenses in an attempt to minimise trading losses."
"Private keys of purchased cryptocurrencies would be stored in omnibus accounts held by Cryptopia in virtual self-hosted wallets, in the proportions recorded in the booksof the same exchange. For security reasons, most of the cryptocurrencies were stored off-line in a ‘cold storage unit’ and managed via a separate address using different secret keys from a ‘hot storage unit’ connected to the blockchain network, primarily kept in order to meet the trading requirement each day. This holding structure facilitated the circulation of cryptocurrencies as transfers effected directly on the exchange by crediting and debiting the users’ accounts were instant and never affected by blockchain congestion."
"As of June 2021, over 55,000 users had completed the claims registration step. This was the first step required by former users of the Cryptopia exchange for regaining funds. The process further entails much bureaucratic red tape from the court system in New Zealand."
"A former employee has reportedly pleaded guilty to embezzling NZD 245,000 (USD 172,000) worth of cryptocurrencies and stealing customer data from the now-defunct New Zealand-based crypto exchange Cryptopia." "At the time of the transactions, the bitcoin was worth about $235,000."
"The hack was noticed after someone told the exchange’s liquidators they had accidentally deposited some bitcoin into an old Cryptopia wallet and requested the funds be returned. After reviewing Cryptopia’s wallets, the liquidators saw 13 bitcoins had been illegally withdrawn from various wallets in a series of transactions, some of which had been laundered via a mixing service. At the time, the laundered bitcoin totalled about NZD 235,000 (USD 165,000). Then the man stole more cryptocurrency, worth about NZD 10,000 (USD 7,000)." "At the time of the transactions, the bitcoin was worth about $235,000."
"The ex-employee reportedly had issues with management about the handling of private keys for many wallets held by the exchange. At one point, the employee made an unauthorized copy of private keys from Cryptopia’s wallets and saved it on an external storage device, transferring the information to his personal computer."
“The defendant admitted that he was frustrated with Cryptopia but also motivated by the belief that he could get away with the theft as he thought nobody would ever check the old deposit wallets,” the summary of facts said. "At some point during his employment, the employee made an unauthorised copy of private keys from Cryptopia's numerous wallets and saved it on a USB storage device, taking it home and uploading the information to his own computer."
"[H]e admitted to police he had copied and removed the keys from Cryptopia’s premises, stolen the bitcoin and other cryptocurrency and put it through a mixing service."
"Grant Thornton, upon reviewing a number of transactions, found that 13 bitcoin had been siphoned off from a number of wallets. The liquidator also discovered two of those bitcoin had been put through a crypto mixer in attempt to conceal their provenance." "When informed by an associate that Grant Thornton was reviewing the old deposits, he confessed to the liquidators what he had done."
"On September 10, the employee emailed David Ruscoe and Tom Aspin of Grant Thornton and admitted stealing the bitcoin, as well as another cryptocurrency worth about $10,000." "He said he had returned some of the stolen currencies and offered to repay the remainder." "The following day he emailed again saying he had returned six of the stolen bitcoin and sought an assurance that if he returned the remaining bitcoin he would not be charged or accused of wrongdoing."
"The man, whose charges are unrelated to the 2019 hack, then told Cryptopia’s liquidators, Grant Thornton, in September that he had deposited bitcoin into an old Cryptopia wallet and requested they be returned, Stuff reported." "Later that day he returned the six bitcoin and immediately messaged his partner to tell her he had “given it all back”."
"He then sent her and his business partner another message to say he thought he would “be OK”, and that “they said ‘thank you for returning it’”."
"The ex-employee said he had returned some of the stolen currencies and offered to pay back the remaining amount." "This employee pled guilty to charges in New Zealand courts in July of this year and is expected to be sentenced sometime this month." "The hack was not related to the former employee's charges."
"Detective Sergeant James Simpson previously said police were keeping an open mind as to who was behind the Cryptopia hack."
"He said the “unique, complex investigation” had posed challenges for police, and that they had not dealt with such a crime before.""
"According to a report by local news outlet Stuff, the ex-employee has admitted to two charges: theft by a person in a special relationship, and theft of over NZD 1,000 (USD 700). He will receive his official sentence on October 20. The Christchurch district court has granted the man interim name suppression." "Through his lawyer, Allister Davis, he admitted two charges – theft by a person in a special relationship, and theft of more than $1000. He was convicted and remanded on bail until sentencing on October 20."
Cryptopia had poor security policies, and one of the employees was able to access the private keys for the wallets. After Cryptopia went into liquidation, they therefore still had access to the hot wallets. Some users erroneously deposited funds there, and this employee was able to take them. After Grant Thompson started to dig around, he decided to come forward and admit what he'd done. All the funds involved were returned.
https://www.stuff.co.nz/national/crime/125617315/excryptopia-staffer-admits-stealing-almost-250000-of-cryptocurrency (Dec 27)
Cryptopia Exchange Kept Users' Cryptos in Pooled Wallet: Liquidator - CoinDesk (Feb 7)
Cryptopia - Home (Dec 27)
Cryptopia - Contact Us (Dec 27)
https://www.grantthornton.co.nz/globalassets/1.-member-firms/new-zealand/pdfs/first-liquidators-report-31-05-2019.pdf (Dec 27)
Ex-Cryptopia Employee Pleads Guilty to Stealing $170K in Crypto (Dec 27)
Ex-employee pleads guilty to stealing over $170,000 from Cryptopia (Dec 27)