Recently hacked New Zealand crypto exchange Cryptopia has received the green light from the police to continue its operations.
In an official statement on February 13, a police spokesperson said: “Cryptopia can open again whenever they like.” However, the police investigation into Cryptopia remains ongoing.
Real hack or exit scam?
Cryptopia was the victim of 2019’s first major hack, in which the company lost more than $16 million in crypto funds.
On January 14, 2019, company representatives claimed they had closed Cryptopia for unscheduled maintenance. However, two days later it emerged that the hack was the cause of the exchange’s shutdown. When Cryptopia announced the unscheduled maintenance, they already knew the attack had taken place. That raised suspicion that Cryptopia was running an exit scam.
During maintenance, 9,390 ETH was moved out of Cryptopia’s tagged wallet to an unknown address. Ten minutes later, according to Whale Alert, 48 million CENNZ tokens were also moved out of a Cryptopia wallet. By doing this, Cryptopia raised further suspicion about the hack. Official statements were scarce and many people who held wallets on the exchange remained skeptical.
We cannot comment as this matter is now in the hands of the appropriate authorities. We will update you as soon as we can.https://t.co/9uMiKQwb6u
— Cryptopia Exchange (@Cryptopia_NZ) January 15, 2019
The main part of the investigation is done
Detective Inspector Greg Murton from New Zealand’s Police Department told the NZ Herald that the High Tech Crime Group had finished its investigation at Cryptopia’s business premises. That means the exchange can now resume its work.
He also said:
Cryptopia management have full access to their facilities and business premises and the Police investigation is not preventing their business from getting up and running again.
Police didn’t give any additional info about the charges or how much money the hackers stole.
With very little information available, the exact value of the stolen funds has been a hot topic among the exchange’s community. People have estimated the losses to be anything from $15 million to $23 million. Cryptopia Director Pete Dawson said commentators had misinterpreted information about cryptocurrency transfers but did not say how much the hackers stole.
Problems before the hack
Before the alleged hack, Cryptopia faced numerous problems, from the bear market to a class action lawsuit. Christchurch lawyer Clive Cousins said last year that multiple Cryptopia customers had approached him. These customers had faced delays or were unable to withdraw funds from the crypto exchange.
The NZ Herald also reported that the exchange was facing numerous issues. One of these was the fact that cryptocurrency doesn’t earn interest due to the lack of regulation. The paper also reported that users who lost their password and couldn’t access their funds could potentially face tax complications.
Cryptopia’s main problem was that it didn’t communicate news of the hack clearly to its users. If it had done so, it seems less likely that users would suspect any illegal activities. However, the exchange’s silent treatment has been far from reassuring.
The big question still remains: if Cryptopia resumes its trading, will the affected customers get a refund from exchanges’ own reserves?
Even after the official police statement, Cryptopia has given users little information through its official channels.
Update: The police have now given us access back to our building, while they continue their investigations. Our staff are working relentlessly to evaluate the funds that were stolen.
— Cryptopia Exchange (@Cryptopia_NZ) February 14, 2019
These short tweets don’t answer any important questions. If the exchange wants to regain its customers’ trust and find new users, it might want to rethink its communication strategy.