Cryptopia Liquidator Say Hacked Crypto Exchange Flouted AML Laws

Evidence presented by liquidators from accounting behemoth Grant Thornton suggests that New Zealand crypto exchange Cryptopia failed to comply with anti-money laundering (AML) regulations before suffering a hack back in January 2019.

Cryptopia Had Zero KYC/AML Compliance Pre-hack

According to NZ Herald, liquidators from accounting giant Grant Thorton have filed new evidence to a Christchurch High Court indicating that the cryptocurrency exchange platform Cryptopia allegedly did not comply with all legal requirements when setting up trading accounts for new customers.

David Ruscoe, a liquidator from the accounting firm reportedly told local news outlet RNZ Business that he is currently working with the New Zealand Police Department and the Department of Internal Affairs in on-going investigations about Cryptopia’s compliance of AML regulations.

In an affidavit presented to the court, Cryptopia liquidator’s remarked:

“We have given careful consideration to the limited personal identification information available because, in our view, it raises various issues including anti-money laundering compliance.”

According to the liquidators, the crypto exchange has so far been unable to provide detailed information for some 933,000 active user accounts. Also, Cryptopia allegedly did not place trading limits on over 44,000 early user accounts believed to hold $23 million in cryptocurrencies.

Furthermore, only 9475 of Cryptopia’s 2.2 million customers were based in New Zealand. The remainder of the crypto exchange platform’s customer base is believed to be spread across the U.S., Russian, Britain, Japan, Brazil, and South Korea no name a few, per internet location addresses provided by Google maps.

Also, an unidentified number of user accounts allegedly holding $3 million in crypto have been traced to uninhabited tropical islands near Australia. This has raised further questions about Cryptopia’s adherence to Know-Your-Customer (KYC) regulations for crypto exchanges.

Cryptopia: Anatomy of Another Failed Crypto Exchange

The evidence filed by Grant Thornton liquidators is part of a four-day court hearing that began on Tuesday (February 11, 2020) to ascertain the property of some $250 million in crypto. Cryptopia traders will be required to present additional information to verify their identity and comply with AML laws before receiving their crypto-assets, per reports.

Cryptopia which previously listed over 800 different digital currencies and virtual assets including Bitcoin (BTC) and Ether (ETH), has experienced a downward spiral since suffering a hack back in January 2019. The company announced significant losses and the theft of $23 million worth of crypto, as reported by BTCManager.

Less than a month after, the crypto exchange reportedly suffered another hack that led to the loss of some 1,675 ETH tokens worth about $16 million as at the time of the report. Cryptopia then relaunched in March 2019 revealing that its crypto exchange platform now offered 40 secure trading pairs and promised to clear more coins for traders.

In May 2019, Cryptopia went into liquidation after attempts at relaunching its crypto exchange platform proved unsuccessful.