NZ Cryptopia exchange reports hack – Industry incredulous

  • By Tom Cleveland

  • January 25, 2019
  • 3:02 am BST

Along the lines of truth being stranger than fiction, the New Zealand exchange, Cryptopia, has reported that a hack has “resulted in significant losses”, but pundits in the industry are not buying the story. As incredulous as it might sound, outsiders are pointing to past and present behavior, and then describing the latest chapter in this ill-fated exchange as nothing short of a cleverly designed “exit scam”.

For the moment, Cryptopia has suspended operations. Per its website: “Cryptopia is currently in scheduled maintenance mode. We will be back soon. We apologize for any inconvenience this may cause, we are working to resume services as quickly as possible.” On Twitter, the exchange added: “We cannot comment as this matter is now in the hands of the appropriate authorities. We will update you as soon as we can.”

Once notified of a possible compromise, local police were quick to raid the offices of the exchange and place the company in full lockdown. The police noted that they were in the early stages of an investigation. Loss amounts have not been disclosed, but insiders have said they suspect the amount to be in the millions. Outside monitoring services have suggested that as much as $3.6 million worth of tokens were recently transferred from Cryptopia to unknown wallet destinations.

Once the hack was detected, Cryptopia responded quickly: “Staff then notified and involved the appropriate Government agencies, including NZ Police and High Tech Crimes Unit who are jointly and actively investigating the matter as a major crime and they are assisting us with advice”.  For now, the police are close lipped: “We are currently talking to the company to gain a further understanding of what has occurred. “A dedicated investigation team is being established in Christchurch including specialist police staff with expertise in this area.”

Cryptopia was founded three years ago by Rob (Hex) Dawson and Adam Clark. It was a hobby at the time, but the enterprise has grown, amassing 1.4 million customers and offering trading in over 800 tokens. A small exchange, its volumes are not reported on CoinMarketCap, an industry aggregator of exchange operating statistics. Being a small exchange and a market maker for so many programs is a difficult task and a high cost one at that, the reason why others in the industry question the veracity of current events.

As news of the compromise hit the airways, various commentators expressed skepticism:

  • Twitter personality WhalePanda: “Interesting that this happens in a bear season where small exchanges are struggling to make ends meet and are aggressively messaging anyone involved with crypto projects to get them to pay listing fees to get listed on their platforms.”
  • Ran NeuNer, the host of CNBC’s CryptoTrader show, raised the possibility of negligence, while wondering if the exchange was capable of refunding clients.
  • Other commentators were not so kind, claiming that the entire episode appeared to be a cleverly orchestrated “exit scam” from a beleaguered exchange.

None of these claims have been substantiated by any evidence whatsoever, but past behavior seems to be coloring the comments by critics. Last summer, Cryptopia had another maintenance shutdown, “citing unexpected issues that required further investigation.” Customers experienced unexplained delays in withdrawal requests following that system downtime. Whatever the case may be at this juncture in “The Land of the Long White Cloud”, there will surely be more details to follow.