Customers of cryptocurrency exchange Cryptopia have been handed a boost this morning with Christchurch High Court ruling that they are entitled to funds held on the platform.
Cryptopia famously fell victim to a security breach in early 2019 with hackers managing to siphon $11 million worth of digital assets from the exchange.
It attempted to re-open two months later but was forced into liquidation in May as a result of the brand being tarnished by the breach.
In December the exchange’s liquidator, Grant Thornton, said that the process of refunding customers would “take some time” as fund recovery was rigorous.
But now there appears to have been positive developments for aggrieved investors, with Justice David Gendall saying that users are entitled to the assets they held in Cryptopia accounts.
“Effectively, the tussle which is before the Court is one between the creditors of Cryptopia on the one hand and the account holders who have invested in the various digital assets (“the account holders”) on the other.” Gendall said.
(1/2) Today, 8 April 2020, Justice Gendall delivered his judgement finding firstly, cryptocurrencies are “property” within the definition outlined in s2 of the Companies Act 1993 and secondly, that account holders' cryptocurrency were held on multiple trusts, separated by …
— Cryptopia Exchange (@Cryptopia_NZ) April 8, 2020
“I reach the conclusion that the cryptocurrencies here situated in Cryptopia’s exchange are a species of intangible personal property and clearly an identifiable thing of value. Without question they are capable of being the subject matter of a trust.”
While the $11 million that was stolen has not yet been traced, Cryptopia continues to hold cryptocurrency worth $101 million on the exchange.
Grant Thornton has been working for the past year to decipher which funds were held by specific clients in order to fast track the refund procedure.
It may still take some time before refunds are credited, but the ruling itself is a crucial step for legitimising cryptocurrencies as an asset class.
“The argument that cryptocurrency is mere information and therefore it is not property is a simplistic one and, in my view, it is wrong in the present context,” Gendall added. “I dismiss it.”