Either you can call it fate or irony, but it all had happened in a way that no one can ever envisage. QuadrigaCX traders lost all their money on the same day as Cryptopia, the New Zealand Altcoin factory does, in the month of January. People were lost in this terrible tragedy and can’t get rid of their loss, as this was the beginning of a period for the people to lose their trust in the Cryptocurrency industry.
What actually happened is that on 14th January 2019, Cryptopia lost $16 million worth of ETH and ERC20 tokens, due to which Cryptopia instantly closed all the withdrawals and turned down. Meanwhile, on the same date, an announcement was made, about the death of Gerald Cotten, the CEO of QuadrigaCX, who had already died a month earlier, on 9th December 2018 in India. Although the withdrawals of Crypto and fiat money had already been made slow on Quadriga’s website, previously, it was made completely frozen, as mentioned by its traders, after the announcement of his death. It became a big loss for the traders of both the exchange.
A Canadian Crypto trader remarked that when he came up with the news about the frozen wallets on QuadrigaCX, he wanted to withdraw his coins from Cryptopia as soon as possible, so that the same thing won’t happen there too, but it was too late to do so, it got hacked. After this incident, QuadrigaCX was filed for its creditor protection which shows that the case was turning out into bankruptcy. Well, things got better and Cryptopia announced that it had filed for protection over bankruptcy in the United States. The exchange got reopened in mid of March and assured its customers that they will issue 14 percent of their submitted exchange. But again when it was upheld for its bankruptcy in New Zealand on 15th May, it got closed.
What could have been the reason for both the Cryptocurrency exchange to be held with bankruptcy? Well, according to the reports, it took place due to the irregularity to look over the wallets and update it as well as due to the lack of internal safety measure. Yet, in such a hazardous situation, Cryptopia offers its traders to convert their assets into Altcoins. At a certain point, only 400 Altcoins left, including BeaverCoin, MileyCyrusCoin, and HoboNickels and in 2017, Altcoins was hopping during the time of the bull market.
What you must know about Altcoin is that they are of low volume, such that they become an easy target for “pump and dump” schemes. Cryptopia became famous for its overabundance of Altcoins but Altcoins aren’t that much user-friendly as their exchanges aren’t had proper banking. One needs to find an exchange that takes their fiat and get Bitcoin and then convert it into Altcoin. It wasn’t an easy task and also not trustworthy. QuadrigaCX, which is another Cryptocurrency exchange in Canada only, comes like a hero at such a crucial time for the traders of Cryptopia. Bitcoin costs much less as compared to Altcoin and as one can easily see Altcoin gains of 500-1500% on Cryptopia. Many coins on the exchange were all splits of Bitcoin or token projects before the big Ethereum ICO craze, and the other coins like MonaCoin, LindaCoin, MintCoin, and VisioCoin were not of good quality and purely imaginative, as said by one QuadrigaCX/Cryptopia customer.
One more thing was the big issue in the system of Cryptocurrency exchange, the lack of KYC. Cryptopia hasn’t KYC for the withdrawals and doesn’t check for it up to NZ $5,000 ($3,270 USD). It got weirder with this policy when the exchange launched its own stablecoin, NZDT, a Cryptocurrency attached to the New Zealand Dollar. After this event occurred, within a few months, the NZDT token was taken down and the transaction was made up to NZ $1 million per day. Cryptopia’s former director of business development, Adam Lyness, who saw the money to and fro of the funds, made a statement in an interview with Newsroom, in last November, saying that, “The bank was worried: what if customers used the Bitcoin to do something bad like buy drugs on the black market?” On 22nd December 2017, Cryptopia sent an email to its traders that all the deposits in the NZDT account were going to be halt, as, on 9th February 2018, ASB will close its NZDT account on 9th February 2018.
With so much of ups and downs, Cryptopia faces great loss within them. In December 2018, it was listed that only 70 Altcoins were left behind or simply dead. Due to this loss, Cryptopia again launched NZDT, concluding the fact that they had reimbursed the services of the smaller bank, as said by Lyness to Newsroom, but he was not able to name the bank. Although, till the place, it would have happened, Cryptopia was charged for its bankruptcy. At the same time, QuadrigaCX was also facing some of its own issues. In January 2018, CA$27 million of Quadriga funds got frozen by the Canadian bank, which leads to the downfall of Quadriga, as it was unable to process withdrawals of its traders.
The downfall of both QuadrigaCX and Cryptopia on the same day, 14th January 2019, brings us to the fact that they had improper management, lacks safety measures and was running their own agenda. Although, they tried their best to fix the issues by following the traditional approach it was dusk of upliftment for such scenario.