Cryptopia takes another hit as its liquidator Grant Thornton revealed that the company had breached AML laws prior to the Cryptopia hack. As per Thornton’s statement, the Cryptopia hack was preceded by a breach of AML laws by the exchange. At a High Court in Christchurch, Thornton stated that the investigations into the matter revealed that the exchange did not meet the legal requirement while accepting new users.
Cryptopia hack preceded by breach of AML laws
Cryptopia’s liquidators have noted various issues in the exchange’s network while also faced huge problems during the recovery process. The exchange was using numerous shady practices to run its services while onboarding new users as well. The exchange pooled users’ assets into a co-mingled wallet.
As per liquidator David Ruscoe and Malcolm Moore’s affidavit, the exchange breached AML laws while onboarding users, risking the platform to financial crimes such as money laundering. As per the statement, the exchange had “limited personal identification information” regarding its users, which caused issues including anti-money laundering compliance.
Ruscoe is working closely with New Zealand’s law enforcement agency regarding the exchange’s AML compliance policy. However, the efforts have borne little fruit as the platform has too little information regarding its users.
For over 900,000 users, there are no details other than a username and an email address. The company hosted over 2.2 million accounts, while only around 100 customers have sent proof of their identification. These users wanted to trade to a limit of $500,000 and thus provided a selfie while holding national ID documents, as well as a statement explaining the source of their funds.
Most of these accounts have been traced to other countries, while less than 10,000 users were native to New Zealand. The company’s users have been traced to the US, the UK, Russia, Brazil, and South Korea. Even worse is the fact that around 44,000 early customers were never verified nor had any trading limit imposed on them. These users were holding around 23 million dollars.
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