As the situation surrounding Crypsy continues to unfold, we saw the company post a blog entry stating that the majority of the funds within the company were stolen over a year ago and that that company has been insolvent for quite some time for a variety of reasons, one mainly being the theft of 13,000 BTC and 300,000 LTC. This announcement was coincidentally made just a day after Cryptsy was informed that a class-action lawsuit was being filed against them. So now what?
Currently, Cryptsy seems to be in too big of a financial hole to dig itself out no matter what happens and is considering bankruptcy. On top of that, trades and withdrawals are suspended indefinitely. Despite however many excuses Cryptsy might have offered in their blog post and regardless of their validity, it doesn’t appear that Paul “Big Vern” Vernon will escape the class action lawsuit being levied against them.
CCN spoke with attorney David C. Silver Esquire of Silver Law Group, one of the law firms filing the class-action lawsuit against Cryptsy. Mr. Silver stated that as of now, everything will go forward as planned. Mr. Silver has represented at least one other client in a lawsuit against Cryptsy for lost, stolen, or mismanaged funds.
When asked if Cryptsy’s claim of a theft would inhibit the filing of the class action lawsuit in any way, Mr. Silver replied:
It’s business as usual. What this appears to be is possibly criminal liability.
He continued, “I represent investors that lose money. The complaints against Cryptsy have been filed and we are waiting on personal service.”
So, Big Vern’s tweets and statements about Denial of Service attacks, as well as server issues and phishing weren’t the cause of Cryptsy holding onto their customer’s funds. That’s a relief to know – sort of. The writer of the Cryptsy company blog post — assumed to be Big Vern — denies that the problems have anything to do with him personally either. Of course, that will remain to be seen until after investigations are complete.
Also, despite the Cryptsy blog pointing to the malicious nature of a Coinbase article leveled against them which caused a domino effect of what was described as a bank-run on Crypsy, why didn’t Big Vern say something about the massive loss of funds sooner? Even though the blog post stated that the intention was to cut back company spending, dig into profits and float the company until the stolen funds were retrieved or Cryptsy was somehow out of the hole, how and why did the alleged theft remain under the rug for so long?
Mr. Silver offered an analogy to how the process could unfold. He said:
So let’s pretend that something like this happened with a company listed on the New York Stock Exchange for example and their customers lost their money. The company would explain to the best of the ability why it happened and they’d also make it clear their intention to get the money back and how they planned to do so.
Cryptsy has attempted to explain some aspects of what they’re doing with a calculated level of transparency by updating their existing blog post twice with some updates about what other legal and customer-reimbursement options they’re considering. The blog post also links to some transactions from an LTC wallet, indicating that they might be trying to track where some of the stolen LTC went.
Referring to the Mt. Gox scandal and the current situation with Cryptsy, Mr. Silver commented that “this sort of thing shows a potential dark side of cryptocurrency. This shows why without proper regulation, it won’t be successful.”
Mr. Silver predicts that this class-action lawsuit will not be a typical one and that it is likely to be long and drawn out. He added, “I am very interested to speak with both former and current employees of Cryptsy, investors and customers who would be willing to offer insight into what has happened over the past year and a half.”
With how seemingly unstable Cryptsy has been as a whole for the past year and a half and how they’ve handled this unfortunate situation thus far, what’s your take on what will or should happen next? Will Cryptsy make due on all or any of the things they’re saying they’ll do for their customers, are they finished as a company, or worse?
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