Blockchain Legal Resource

On May 24, 2019, New Zealand-based online asset exchange, Cryptopia Limited, filed a petition under Chapter 15 of the United States Bankruptcy Code seeking recognition of its New Zealand liquidation proceeding in the United States. On the same day, the United States Bankruptcy Court for the Southern District of New York granted provisional relief to Cryptopia, including extending the benefits of the automatic stay to prevent creditors or other parties in interest from taking actions to interfere with Cryptopia’s assets. The court will conduct a hearing on Cryptopia’s petition to recognize its New Zealand liquidation proceeding on June 25, 2019 in New York.

Cryptopia operated a digital asset exchange, which is an online platform that allows account holders to trade digital assets, including crypto-currencies such as Bitcoin, Litecoin and Dogecoin. According to the filed declaration of one of the liquidators, David Ian Ruscoe, Cryptopia has approximately two million known account holders. In January 2019, Cryptopia was hacked and digital assets with a value in excess of $16 million was stolen from digital wallets stored on the exchange. Ultimately, on May 14, 2019, the holders of Cryptopia’s voting shares voted to place it into liquidation in New Zealand because it was insolvent.

The Chapter 15 petition was prompted by a dispute between Cryptopia and one of its vendors that hosted Cryptopia’s data on servers in the United States. The liquidator’s purpose in filing the Chapter 15 petition was to take advantage of the automatic stay to prevent the contract counter-party from taking actions that might be detrimental to the data and to otherwise assist the liquidator with regard to assets, liabilities and other disputes in the United States.

The case is In re Cryptopia Limited, Case No. 19-11688-smb pending in the United States Bankruptcy Court for the Southern District of New York.