Cryptopia Fumbles Customers’ Stolen Crypto Recovery in Catastrophic F**kup

Journalist:
May 27, 2019

By CCN: Cryptopia, the embattled cryptocurrency exchange at the center of a $16 million hack earlier this year, is in a huge pickle again as a third-party server host demands $2 million to release customer data.

The fall of Cryptopia

Since the turn of the year, Cryptopia has been hacked twice. The first time, the attacker stole approximately $16 million worth of Ethereum tokens from over 76,000 wallet addresses. The losses were less significant the second time but the hacker still managed to make away with a total of 1,675 ETH.

While the operators of Cryptopia attempted to get their crypto exchange back on track, they failed, resulting in the company’s liquidation and a bankruptcy filing in the United States earlier this month.

No access to data

While the liquidators attempt to collect and (re)distribute the missing funds to victims affected by the hack, they have encountered another issue.

Instead of running a database of its own, Cryptopia hired a third-party host in Arizona to store all of the company’s customer information.

Now the Arizona company is terminating Cryptopia’s agreement, demanding $2 million from the cryptocurrency exchange.

Until Cryptopia’s debts are paid, liquidators are unable to access the data they need to determine the digital assets their account holders hold with them also facing the risk of all data overwritten and lost.

“This would be potentially catastrophic for the liquidators and account holders. Recovery efforts are still being made, but to date, none of the stolen digital assets have been recovered,” a liquidator stated to Bloomberg.

According to Cryptopia’s bankruptcy filing, every accounts holder of the hacked cryptocurrency exchange is a potential creditor in the liquidation process with trade creditors owed approximately $2.6 million.

Unprofessional operation adds to customers’ woe

While Cryptopia had started as a hobby project in 2014, the cryptocurrency exchange has grown to up to 300,000 users with the 2017 bull market facilitating the growth of the company.

Cryptopia’s amateur operations led to its January hack, followed by a false report of the event claiming that hackers had only taken $2.5 million instead of $16 million.

Another sign of the casual approach of Cryptopia operators is running a cryptocurrency exchange with 300,000 accounts without implementing their own database.

This decision, the hack, and that Cryptopia failed to compensate the Arizona database host for its services have jointly resulted in the current catastrophic situation where liquidators are struggling to recover their lost funds.

This article was edited by Samburaj Das.

Last modified (UTC): May 27, 2019 13:18

Tags: Cryptopia
Benjamin Vitáris

Ben is a crypto journalist and copywriter who has a great passion for blockchain technology. He believes that decentralization empowers people to take charge of their lives, and gives back what we desired for a long time: financial freedom. Follow him on Twitter @BenjaminVitaris or email him directly at dzsuvalance(at)gmail.com. Benjamin is crafting crypto content from his home office in Budapest, Hungary.