As one exchange collapsed in Australia, another had already called in the administrators and it’s proving a minefield for people to get their money back.
An Aussie cryptocurrency exchange owes a whopping $50 million to creditors after it collapsed in mid-October as users were locked out and unable to withdraw their money.
Failed exchange Blockchain Global, which operated the ACX cryptocurrency platform, was originally thought to owe $21 million, according to administrators Pitcher Partners.
But 107 claims have now been submitted, taking the money owed by the company up to $48.9 million, Andrew Yeo, the administrator in charge, told The Australian.
It comes as digital currency exchange myCryptoWallet, which was founded by Jaryd Koenigsmann in 2017, went into liquidation this week after deleting its social media accounts. Some users complain they are owed up to $50,000.
It came after months of reports that customers were having difficulty accessing their funds, with the company previously claiming it had signed up 20,000 people to its platform.
News.com.au is not suggesting Mr Koenigsmann is responsible for users’ missing funds. He did not respond to request for comment. Liquidators for myCryptoWallet will give an update by December 17.
Meanwhile, documents lodged in relation to Blockchain Global with the Australian Securities and Investments Commission showed creditors are owed amounts ranging from a few thousand to as high as $8.3 million.
Uncovering the state of the company’s finances had been complicated with directors residing overseas, Mr Yeo told the Victorian Supreme Court in November, while it is also subject to four court proceedings.
One of the matters relates to ACX cryptocurrency with claims totalling $13 million against it, which also “include allegations that significant sums of cryptocurrency are unaccounted for’’.
Further complicating the situation is former director Allan Guo who claims to be owed $8.3 million, yet the company’s cryptocurrency is only accessible via a laptop he said was allegedly stolen in China.
“Mr Guo confirmed that he had previously had access to the wallet that contained the cryptocurrency displayed in the company’s balance sheet,’’ said the court judgment.
“He informed Mr Yeo’s staff that before the onset of the Covid pandemic, in late 2019, he was in China and his belongings were stolen.
“Amongst the stolen items was his laptop, which contained the credentials for accessing the wallet, and therefore the cryptocurrency it held.
“Mr Yeo’s staff requested Mr Guo to provide evidence in respect of the alleged theft of the laptop. Mr Guo said he would provide a police report but this report has not been received.”
Another director, Sam Lee, who had been contacted on the Chinese messaging service WeChat and via email, hadn’t responded but was believed to have access to some of the company’s bitcoin, the administrators said.
The case has highlighted the difficulty in tracking down money in the largely unregulated world of cryptocurrency.
While some of Blockchain Global’s assets have been identified with millions in bitcoin and ethereum, the investigation was still in its early stages, according to administrators.
Mr Yeo told The Australian the matter was complex and “further extensive investigations are likely to be required to identify which party has a right to claim the same”.
He admitted a “novel approach” would be required to recover the cryptocurrency as it was different to money stored in bank accounts.
“That is not to suggest that the recovery of such cryptocurrency is impossible,” he added.
ACX is also facing separate legal action launched by 94 investors who are pursuing $10 million after it stopped working in February 2020.
One investor, Bruno Fabre, told The Sunday Age he had used Blockchain Global’s exchange since 2017 and there were no problems until his withdrawals were suddenly blocked, preventing him access to “significant” funds.
“I had no suspicion that it was a scam or anything like that. I was buying and selling, everything was functioning the way I thought it should function,” he told the publication.
“It’s become obvious since then that there’s been some sort of wrongdoing.”
Chloe White of digital asset advisory group Genesis Block warned people to research the ownership of an exchange and its operating history before using it, particularly as crypto was far more lightly regulated compared to other financial products.
“It is challenging for consumers to know how to keep themselves safe when they understandably want exposure to a rapidly growing asset class,” she told The Australian Financial Review.
“There is no such thing as market licence for crypto. There is a gap in regulation.”
It comes as the biggest shake-up to Australia’s payments system in a quarter of a century will take place under a plan to tighten rules surrounding cryptocurrency, Buy Now Pay Later and services like Apple Pay.