Cryptopia’s Lack of a Backup Database can Cost Users Another $2 Million
There is never a shortage of controversy in the cryptocurrency world. Following its hack earlier this year, there have been a lot of questions regarding Cryptopia and how things would move on from there. So far, it seems little to no real progress has been made, and things are even worse than initially assumed. In a recent reveal, it became apparent the company doesn’t even have a backup of its hacked database, as that is controlled by a third party. That third party is owed some money by the exchange as well.
It is never good to see any cryptocurrency exchange go through a hack. In the case of New Zealand’s Cryptopia, said hack took place earlier in 2019. It is believed nearly $16m worth of funds has been stolen from the platform and its users. Recovering the funds has proven to be very difficult, if not entirely impossible. An official investigation is still ongoing, albeit the new information coming to the surface casts a dark shadow over the exchange and how it was run. Not a good sign for its customers, albeit it seems unlikely too many people hold out hope of getting their money back.
While it is true Cryptopia was not a professional project in 2014 and the first few years after, it seems little has changed ever since. Despite noting major growth in 2017 and beyond, the exchange still had its own odd ways of handling crucial aspects of their core business model. The hack in early 2019 is the direct result of taking a seemingly casual approach to operating a cryptocurrency trading platform. Folding the company was the only logical option in March of 2019, although it did not amuse too many people.
Even at this time, the company still allegedly owns tens of millions of dollars worth of assets. Liquidators are trying to gain access to all of the wallets and tally up the funds accordingly. After all, this money has yet to be distributed to the rightful account holders. It is a very tedious and time-consuming process, primarily because it is difficult to attribute the correct balances to its specific owner. This is another example of why Cryptopia was run in such a manner a hack was pretty much inevitable.
To put this in perspective, the company itself doesn’t have a proper backup of its accounting database. Instead, that information is managed by a third-party service provider in Arizona. Recovering said information should be a breeze, yet it clearly isn’t. The Arizona company is terminating its services with the exchange and wants $2m in compensation as well. If the company is not paid accordingly, there is a genuine chance all of the necessary data will be lost forever. After all, the third-party is not responsible for maintaining this information if they are not compensated. A very uneasy situation is created which might take some time to resolve.
It is evident this New Zealand exchange was run by a team which has made some unusual decisions. Most of those decisions have now come back to haunt the company and its users. Unfortunately, it will be those users who will be the biggest victims due to this mismanagement. Since the information necessary to compensate account holders is not even owned by the company getting hacked, one has to wonder why things were set up this way so many years ago. Letting third parties take care of everything is never a smart idea, especially in the cryptocurrency industry.
For the time being, it remains to be seen how things will progress from here on out. After all, it seems unlikely Cryptopia will be of any help in this regard. Using the users’ funds to effectively foot the $2m bill for the Arizona company is not a valid option either. All of the affected users will almost have to hope for a major miracle, as they will not see their funds returned to them without it. While recovery efforts on the wallets are still ongoing, none of these attempts have been successful so far.
Disclaimer: This is not trading or investment advice. The above article is for entertainment and education purposes only. Please do your own research before purchasing or investing into any cryptocurrency or digital currency.