Business 25 January 2019

Erik Gibbs

Cryptopia hack may be larger than reported

In the wake of the hack of the New Zealand-based cryptocurrency exchange Cryptopia more than a week ago, the initial response seemed to be positive. The Binance exchange got involved shortly after, thanks to the help of a cyber sleuth, and was able to prevent a certain amount of funds from being moved across crypto wallets. The hack reportedly saw around NZ$3.65 million (US$2.3 million) in Ether and Centrality stolen, but some are now beginning to believe that the theft was bigger – much bigger.

According to a report by New Zealand media outlet Scoop, there has been a lack of information from the exchange and from police on any progress of an investigation into the hack. Campbell Pentney, a crypto and tax specialist with the law firm Bell Gully, told the site that historically, following other crypto exchange hacks, information has been disseminated quickly regarding the size of the theft, which crypto assets were stolen and what percentage of the exchange’s funds were lost.

In the case of the Cryptopia hack, though, there have still not been any updates – ten days after the theft. The company refers all questions to the police, who have only issued one update but haven’t provided any specific details.

Pentney states, “It’s still in limbo. The Police say they are following leads, but investors are getting pretty upset with the lack of information.”

Without any real updates, some are now feeling that the hack could have been larger or could have involved a substantial portion of Cryptopia’s funds. They are becoming concerned that the exchange might shut down, much like Canadian crypto exchange MapleChange.

Investors are also concerned that a shutdown would result in the loss of access to data needed to file tax returns. Pentney explains, “These cryptocurrency trades are not on the blockchain; it’s Cryptopia’s internal systems that are doing the transactions. People can’t get their records, so they can’t sort their [taxes].”

About the only thing that has been verified is that loss of $2.37 million, since a single transfer in that amount was seen on the blockchain. However, some believe that has much as $27.098 could have been stolen.

As Pentney aptly states, “The best resolution is the thief is caught, he or she hands over private keys and then police have access to the assets. But it’s not looking particularly great in terms of getting them back, particularly if the thief is offshore.”

Note: Tokens on the Bitcoin Core (SegWit) chain are referenced as BTC coins; tokens on the Bitcoin Cash ABC chain are referenced as BCH, BCH-ABC or BAB coins.

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