Search Begins For $ 50 Million In Cryptocurrency Lost After Two Australian Stock Exchanges Collapse | Crypto-currencies

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Andrew Yeo doesn’t know what happened to tens of millions of dollars in cryptocurrency owned by hundreds of clients of the collapsed ACX exchange, but he aims to find out.

In mid-October, the seasoned insolvency practitioner was appointed a director of Blockchain Global, the company that ran ACX, and since then has taken a crash course in everything crypto from the tech experts in the industry. company where he is a partner, Pitcher Partners. .

“There are always things that are different – you have that with every job,” he says.

“It’s always about finding out what’s different in this industry and how you can use it. “

A cryptocurrency exchange is a digital marketplace that allows customers to buy, sell, and hold cryptocurrency. He earns money through fixed fees or by taking a percentage of transactions. No traditional bank in Australia allows customers to buy and sell cryptocurrencies, although the Commonwealth Bank has a pilot project underway, so exchanges are currently the only way to do this.

To shed light on what happened to the cash and coins held in ACX client accounts, Yeo will need to clear out a jungle of claims and counterclaims that have been unfolding in court since last year.

“Clearly there are a number of investigative channels we can have and figuring out which ones are best to go first is not a straightforward task,” he says.

There’s a lot at stake. Since Yeo’s appointment, creditors, including ACX clients and Blockchain Global’s directors and management, have presented claims owed to them for nearly $ 50 million.

ACX is not the only Australian stock exchange struggling in what is – for now – a completely unregulated industry.

Last week, the smaller Mycryptowallet exchange also fell under administration, and its clients are believed to have owed hundreds of thousands of dollars.

Globally, trade has proven to be vulnerable to failure and theft; Japan’s Mt Gox operation collapsed in 2014 after someone stole 850,000 bitcoins and in 2016 hackers stole nearly 120,000 bitcoins from the British Virgin Islands group Bitfinex, which managed to survive and still exists today. It is not suggested that ACX’s assets were stolen.

This week, the Morrison government announced its intention to regulate trade – in the near future.

In a speech to the Australia-Israel Chamber of Commerce on Thursday, treasurer Josh Frydenberg said the government would consult on establishing a licensing system for digital currency exchanges, as well as regulating digital currency exchanges. companies that hold crypto on behalf of clients.

The consultation process is expected to be completed by the middle of next year, after elections are due to be held by May 21, 2022.

Experts say license swaps are a good idea, but need to be backed up by law enforcement.

“With regulation comes a halo, businesses can say they have a seal of approval and represent that people should have confidence in them,” said Consumer Action Law Center CEO Gerard Brody.

“The regulatory regime itself needs to be robust. There is no point in licensing a business if the standards it must meet under that license are detrimental to the consumer.

Pamela Hanrahan, professor of commercial and regulatory law at the University of New South Wales, says licensing creates “moral hazard”.

“It has a kind of color that people are properly regulated, but it’s true for all forms of professional licensing, from hairdressing to anything,” she says.

She cites failures such as the financial planning scandals that rocked the banking industry in the mid-2010s and the failure of Trio Capital in 2009, which deprived retirement savers of $ 176 million and was the biggest collapse of pensions in Australian history, as examples of where the licensing of schemes have failed to protect consumers.

“You have to apply it correctly,” she says.

The victims of the ACX collapse certainly feel they have been overlooked by regulators, including the Australian Securities and Investments Commission.

In a lawsuit filed in the Supreme Court of Victoria, 94 of them claim that Blockchain Global, as the operator of the exchange, owes them $ 13 million in tokens, including bitcoin, ethereum and ripple, as well. only cash held in their ACX accounts.

“The main thing that angers me is that we don’t get any help from Asic,” says an ACX customer.

“These companies are registered with Asic but… we have to sue the company.”

Not all of ACX’s clients are participating in the lawsuit, and it is estimated that there are over 200 who claim to have lost access to crypto and cash held on the exchange.

On Thursday afternoon, Judge Richard Attiwill stayed the proceedings against Blockchain Global over Yeo’s appointment as a director.

However, he allowed him to continue against the other defendants in the case, including Blockchain Global chief executive Allan Guo and the company’s chief financial officer Samuel Lee.

Guo and Lee have not responded to questions from Guardian Australia and have yet to file a defense in the case.

Meanwhile, in another dispute also before the Supreme Court of Victoria, Blockchain Global and Guo are fighting a former company employee, Jin Chen, for control of 117 bitcoins. Chen claims he is owed the crypto for the software development work to run the ACX exchange, but the company and Guo say Chen broke an agreement that was supposed to end the stoush because he didn’t did not make the source code of the software accessible. Chen denies it.

On Thursday afternoon, Attiwill also suspended Chen’s claim against the company in light of the administrator’s appointment, but allowed the contest between Chen and Guo to continue.

The issues are less clear for the smaller Mycryptowallet, which is in the hands of liquidator Terry van der Velde of SV Partners.

SV Partners says little information is available as the appointment is “at a very early stage”, but van der Velde aims to sell the company.

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Hanrahan says the collapses make government regulation of trade urgently needed.

“They have to act fast enough,” she says – but not so quickly that laws fail like those covering financial services.

“It’s one thing to announce it, but you know they’re going to have to deliver it and hopefully not make all the mess they made of Chapter Seven of the Corporations Act.” [which regulates financial services],” she says.

In the meantime, people who buy and sell cryptos should realize that “they have no intrinsic value.”

She believes cryptocurrencies are worse investments than tulip bulbs that changed hands for fortunes during the tulipomania that hit the Dutch in the 17th century, an episode in history considered a classic example of a bubble. speculative.

“At least if you bought a tulip bulb, you can plant it and grow a tulip,” she says.

“These things don’t do anything.”

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