Two Of The Biggest Crypto Dramas Of 2019 Happened On The Exact Same Day
- Both Cryptopia and QuadrigaCX shut down their withdrawals and froze transactions on January 14th.
- Since then, both exchanges have filed for bankruptcy.
Coincidences happen all of the time, but there are a few coincidences that are too close not to draw a connection. That is exactly the case with QuadrigaCX and Cryptopia, according to a recent article from Decrypt.co. A few customers discussed their recent losses that they experienced in January, watching QuadrigaCX go under on the same exact day that Cryptopia’s hack happened.
The hack of Cryptopia has been well publicized, resulting in the loss of $16 million in both ETH and ERC20 tokens on January 14th. The exchange discovered the loss rather quickly, taking the exchange offline and stopping anyone else from making withdrawals. Unbeknownst to Cryptopia, Quadriga was announcing the passing of their CEO the month before, which was a strange enough situation on its own.
Quadriga had already been slow for quite some time, but the news of Gerald Cotten’s death coincided with the exchange completely freezing withdrawals. As all of this news hit, investors on both sides of these exchanges were take aback, losing so much in one day. One trader named Ida, who omitted her last name, said that she switched to her Cryptopia account after having troubles with Quadriga to pull her coins as soon as possible, but Cryptopia had already been hacked. With the fast-acting work of Cryptopia to shut down withdrawals, Ida was met with another roadblock. The story was the same with many other mutual traders.
QuadrigaCX did not come back from their freeze, deciding to file for creditor protection. The company ultimately decided to file for bankruptcy recently. Cryptopia worked with the authorities in an attempt to relaunch the platform in the middle of March this year, but it didn’t quite go as planned. After multiple attempts by the team to revive the platform with the right security measures, Cryptopia decided to shut down and file for bankruptcy in New Zealand less than two weeks ago.
Realistically, the fact that both of these exchanges met the beginning of their ends on the same day is probably just an unfortunate twist of fate. However, the lack of regulations in the crypto industry are likely the true culprit here, along with the lack of protection.
Cryptopia used to be a place for crypto traders to create a diverse home of converting to altcoins. The platform even listed 400 altcoins at one time, including HoboNickels and BeaverCoin. The year 2017 was a great atmosphere for altcoins, though the volume is rather low for these types of coins. By having such a lot volume, these altcoins tend to become organized “pump and dump” schemes, and Cryptopia ended up being a place for these altcoins.
However, since the exchanges could not actually get the banking needed, these altcoins were not actually available for purchase, and could only be purchased through an exchange that let users use fiat currency to buy Bitcoin. In an interesting turn of events, that was where Quadriga was technically connected with Cryptopia. They would allow for the purchase of these coins, and consumers could go back over to Cryptopia for the altcoins.
Another major issue was the lack of Know Your Customer (KYC) protocols with Cryptopia, which they did not require for NZ $5,000 ($3,270 USD). In May 2017, Cryptopia’s bank started to notice the issues when the exchange decided to launch a stablecoin that they pegged to the New Zealand dollar called NZDT. As a result, locals could purchase their Bitcoin from Cryptopia directly. As funds flew in and out of their bank accounts, Cryptopia’s bank worried that the funds could be used for illicit activities, like drug purchases from the Black market. When the bank decided to shut down their accounts by February 2018, Cryptopia sent out a notification to their users.
Between the banking problems of both Cryptopia and QuadrigaCX, combined with poor accounting of their own blockchains, the companies finally met their demise. On January 14th, both exchanges saw the first stage of failure. Though both have sought the help of the traditional financial system, there are still many former customers that just want their money back.
Author: Krystle M