Former Cryptopie Staff Admits Stealing Nearly $ 250,000 In Cryptocurrency
A man has pleaded guilty to stealing nearly $ 250,000 in cryptocurrency and customer data from the Cryptopia international bureau de change.
The former employee, whose name has been deleted on an interim basis, appeared in Christchurch District Court on Monday before Judge Gerard Lynch.
Through his lawyer, Allister Davis, he admitted two counts – theft by a person in a special relationship and theft over $ 1,000. He was convicted and remanded in custody until sentencing on October 20.
Cryptopia Limited is a Christchurch-based cryptocurrency exchange that at its peak employed over 80 people and had over 1.4 million customers worldwide.
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In January 2019, Cryptopia was hacked and over $ 25 million worth of cryptocurrency stolen, representing 15% of its customers’ digital currency stock, the biggest theft in New Zealand history.
It is not linked to the charges of the former employee.
In May 2019, the company went into liquidation, an ongoing process managed by the Grant Thornton accounts.
According to the summary of facts from Monday’s hearing, the former employee reportedly expressed concerns to management about the security of the private keys of many wallets held by the company.
He described cryptocurrency wallets as being similar to an electronic bank account with an Eftpos card attached. In order for a person to deposit into a wallet, all it takes is an account number, known as a “public address”.
In order for the account owner or administrator to withdraw or transfer funds from this wallet, an additional number is required, a private key – similar to a PIN on an Eftpos card.
Unlike an Eftpos card, the public address and private keys of a crypto wallet are directly linked to each other by a complex mathematical algorithm.
The liquidators have locked down Christchurch-based Cryptopia. (Video first published in May 2019)
At one point during his employment, the employee made an unauthorized copy of the private keys of Cryptopia’s many wallets and saved it to a USB storage device, took it home and downloaded the information. on his own computer.
Having the private keys to Cryptopia’s wallets has potentially given it access to tens of thousands of digital wallets and over $ 100 million of many types of cryptocurrency.
In the event of the theft of funds, Cryptopia would have had no way of recovering them, unless the employee returned them or provided the private keys of the new wallet in which the funds had been placed.
After the liquidation, all Cryptopia workers had their contracts terminated, but the employee kept his copy of Cryptopia’s private keys.
On September 3, 2020, Grant Thornton’s David Ruscoe received an email from a former Cryptopia client saying he accidentally deposited bitcoins into an old Cryptopia deposit wallet and requested that the funds be returned.
Grant Thornton then examined Cryptopia’s wallets and noticed that 13 bitcoins had been illegally removed from various wallets in a series of transactions.
Two bitcoins were subsequently subjected to a mixing service, designed to launder cryptocurrencies and hide both their destination and the identity of the person who controls them.
At the time of transactions, bitcoin was worth around $ 235,000.
On September 10, the employee emailed Grant Thornton’s David Ruscoe and Tom Aspin and admitted to stealing bitcoin, along with another cryptocurrency worth around $ 10,000.
He said he returned some of the stolen currency and offered to reimburse the rest.
The next day he again emailed saying he had returned six of the stolen bitcoins and asked for assurance that if he returned the remaining bitcoin he would not be charged or charged with wrongdoing.
Later that day, he returned the six bitcoins and immediately texted his partner to say he had ‘returned everything’.
He then sent him and his business partner another message telling him that he thought he ‘would be fine’ and that ‘they said’ thank you for returning it ‘.
Later that month, he admitted to police that he copied and removed keys from Cryptopia’s premises, stole bitcoin and other cryptocurrencies, and subjected them to a mixing service.
“The defendant admitted that he was frustrated with Cryptopia but also motivated by the belief that he could get away with the theft because he believed that no one would ever verify the old deposit wallets,” the summary of the facts said. .
When informed by an associate that Grant Thornton was reviewing the old deposit, he confessed to the liquidators what he had done. He then returned the stolen change.
Detective Sergeant James Simpson previously said police were keeping an open mind about who was behind the Cryptopia hack.
He said that the “unique and complex investigation” posed challenges for the police and that they had never dealt with such a crime before.