In January 2019, the New Zealand-based crypto exchange, Cryptopia, suffered a security breach which resulted in the loss of about $16 million (per market price at that time) worth of ETH and ERC20 tokens. The breach continued for about two weeks before the exchange managed to regain control of its wallets.

Today, Cryptopia, a now defunct crypto exchange has informed its twitter followers that the High Court of New Zealand has passed its judgement on the status of its compromised assets. In the tweet, Cryptopia shared the 74-page court document which gave the details about the judgement.

(2/2) … individual crypto-asset type. This means that the cryptocurrencies are beneficially owned by the account holders and are not assets of the company. Read the full judgement here: https://t.co/ceUywTVdFY — Cryptopia Exchange (@Cryptopia_NZ) April 8, 2020

The high court judge who presided over the case is in the person of Justice Gendall. According to the judge, cryptocurrencies are “property”, within the definition outlined in the section 2 of the 1993 Companies Act.

Secondly, the judge said that account holders’ crypto were held on multiple trusts, separated by individual crypto asset types. Hence, he claimed that the cryptocurrencies are beneficially owned by the account holders, and thus not the property of the company.

In the judgement, Justice Gendall noted that users’ funds on the exchange had been held in multiple trusts. He said each of the trusts grouped together account holders holding a specific type of digital asset. Therefore, the account holders within each specific group are treated as the co-beneficiaries of the same trust.

According to Justice Gendall, crypto is a species of intangible personal property and clearly an identified thing of value. As property, the judge claims crypto assets are therefore capable of being the subject matter of a trust.

If the liquidators are able to recover the stolen funds, the judge said they are to be dealt with ‘pro rata’ within each specific trust for the digital asset concerned. Adding that, this should be done according to the amounts recovered, assessed against the amount stolen.

Per the judgement, in instances where the assigned liquidator, Grant Thornton, is unable to ascertain the identity of a particular account holder, the affected digital assets are to be dealt with pursuant to New Zealand’s Trustee Act.