Security breaches continue to be a nightmare for both exchange platforms and investors in the cryptocurrency industry. No matter how careful one tries to be, there seems to always be a loophole to be exploited by daring hackers in the crypto space.
We have seen investors losing thousands and millions worth of their cryptocurrencies to sim swappers and hackers. We have also seen big and small exchanges that never recovered from the loss they incurred after a series of security breaches.
In fact, as a crypto enthusiast, if you have not read about how the high and mighty Mt. Gox bitcoin exchange was brought down to nothing by some notorious hackers, then you probably must be living under a rock.
This time around, we will be saying farewell to Cryptopia Exchange, a New Zealand cryptocurrency trading platform that became a victim of a multi-million dollar hack in January this year.
Cryptopia entered the virtual currency exchange business in 2014 and was founded by the entrepreneur duo Rob Dawson and Adam Clark. The exchange struggled in its first few years in the industry until 2017 when the founders decided to quit their jobs to work full time for the company.
The exchange recorded an influx of user registrations that same year, and it moved from 30,000 users to over 1 million users from May to December 2017. This placed Cryptopia as one of the leading exchanges in New Zealand.
Short-lived success
All was good until January 2019, when the exchange was notoriously hacked and millions of dollars stolen from its purse. Data from Elementus, a blockchain analytics company, revealed that the exchange lost about $16 million in ETH and other ERC20 tokens during the incident.
What came as a surprise was that the hackers continued to steal funds even after the exchange discovered that its security had been breached. The hack lasted for days until the majority of the exchange’s funds were siphoned.
Trading services were placed on hold to prevent a further breach, while New Zealand police authorities and other security agencies have been investigating the hack with excellent progress.
In March, the exchange announced that they were back in business but the website remained in read-only mode, and traders’ balances remained the same as they were before the hack. This, too, was short-lived.
The end of Cryptopia Exchange
Five months after the hack, the exchange came out to say that it was going out of business as it had recruited liquidators Russell Moore and David Ruscoe, both from Grant Thornton, New Zealand, to liquidate the company in order to settle staff, shareholders, and affected users.
In an official press release, Cryptopia noted that efforts to recoup the losses have proven abortive; hence shutting down the business is a last resort.
We realize Cryptopia’s customers will want to have this matter resolved as soon as possible. We will conduct a thorough investigation, working with several different stakeholders, including management and shareholders, to find the solution that is in the best interests of customers and stakeholders, David Ruscoe said.
The liquidation process is expected to take up to a month or two due to the complexities involved, according to the liquidators. Once the process is completed and all affected parties have been settled, the Cryptopia cryptocurrency exchange will cease to exist.
A crypto exchange is only secure until it is hacked. The case of Mt. Gox and Cryptopia show that it is not easy to recover from a major security breach.
Just last week, leading cryptocurrency exchange Binance – which is supposedly the most secure exchange in the space – reported a security breach that led to the loss of 7,000 BTC ($40 million at that time) and trading activities were suspended due to system upgrades to prevent recurrence.
Unlike Cryptopia, Binance had secured the majority of user funds in SAFU, so the hack did not cause any severe damage to the exchange.
Binance announced today that its trading services are now open and it is giving away 50,000 BNB and free seven-day VIP levels up to qualified users as a way of appreciating the support of the community.
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