The Cryptopia Nightmare Drags on as Liquidators Struggle to Reimburse Hacked Users

As the cryptocurrency market finds its legs in mid-2019, an unfortunate undercurrent persists vis-à-vis the floundering New Zealand exchange Cryptopia.

Its one-time international popularity and solid reputation have already been ruined after the exchange dragged its feet on revealing a January hack, which cost its users somewhere in the region of $16 million in cryptocurrency drained from Cryptopia wallets.

An international tangleDespite the fact that the blockchain ledger's open-book transparency has made it clear which cryptocurrency wallets hold the majority of stolen funds, the identities behind Cryptopia's hackers are difficult to determine.

Held exclusively on Arizona servers, this data contains vital information that can reconcile individual holdings with the currencies held by Cryptopia.

These facts cater for a messy situation with many moving parts, in which the repayment of international customers of a New Zealand-based cryptocurrency exchange hinges on the willingness of a federal court in the United States to force a domestic data company to comply with data release requests.

By Gorski's estimation, the lesson learned from Cryptopia is that over the long run, "This approach can end up biting them, and more importantly their users, in the a-."

Centralized exchanges like Cryptopia are liable when their platforms are breached, even if they go to great lengths to avoid responsibility.

U.S. investors take the biggest hitOne notable circumstance that lends a new tint to the liquidation situation is the fact that Cryptopia's holdings were largely made up of money of American users.

U.S. account holders made up the largest slice of the Cryptopia userbase and also accounted for the majority of exchange's revenues.

The Cryptopia saga has pulled back the curtains on many of cryptocurrency's weak points, especially the centralized model relied upon to build momentum for the bull markets today and in the past, and one that is still used.