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Author Topic: Cryptopia Judge: "1. Crypto is property 2. Even w/o keys, crypto remains yours"  (Read 605 times)
aesma
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August 30, 2020, 12:47:03 AM
Merited by suchmoon (4), friends1980 (1)
 #21

I think forks are a bit of a special case, because it's a completely separate entity that decides to give assets to crypto hodlers. It creates all kinds of problems, not just legal ones. An exchange has a cold wallet for exemple, where you want it to have a significant amount of assets, in a secure way. Each time there is a fork/airdrop like that, it would need to risk that cold wallet's keys to be able to access the new coins.
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August 30, 2020, 04:02:49 PM
Last edit: August 30, 2020, 04:28:55 PM by friends1980
Merited by aesma (1)
 #22

Oh! Had forgotten this kiwi attempt to fly lol.

The yank 'legal' system is meanwhile getting there https://decrypt.co/39574/not-your-keys-not-your-coins-enshrined-in-us-case-law-says-lawyer

albeit about forks not hacks, but it is a start.

I think forks are a bit of a special case, because it's a completely separate entity that decides to give assets to crypto hodlers. It creates all kinds of problems, not just legal ones. An exchange has a cold wallet for exemple, where you want it to have a significant amount of assets, in a secure way. Each time there is a fork/airdrop like that, it would need to risk that cold wallet's keys to be able to access the new coins.

@V8s: thanks for that information. I had not heard about this case and it's indeed damned interesting.

@aesma: I completely agree.

I've checked the information in the article and also double-checked the tweet to which it refers. "Not your keys, not your coins" is what the tweet says, but is not what the judgment says. "Not your keys, not your forked coins" is what the judgment says.

Doesn't mean I necessarily agree with Coinbase's policy, but that's irrelevant to the discussion. It opens a lot of new discussions ideas and legal issues.

I'll try and find a copy of the judgment and read it completely and try to analyze it. I'll keep you posted.

[For that, I'll probably open an other thread, though, as I'd like to reserve this thread for the (still on-going) Cryptopia bankruptcy procedure.]
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August 30, 2020, 05:34:48 PM
 #23

Isn't all the Cryptopia money going to pay the liquidators anyway ? Who all seem to have crazy salaries/packages/compensations. I'm glad I could get most of my bitcoin out of there when they briefly reopened.
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September 15, 2020, 07:06:09 PM
Last edit: September 19, 2020, 04:12:49 PM by friends1980
 #24

Isn't all the Cryptopia money going to pay the liquidators anyway ? Who all seem to have crazy salaries/packages/compensations. I'm glad I could get most of my bitcoin out of there when they briefly reopened.

Don't be afraid to open the reports and read them: it's really not too difficult and very transparent. Every report contains a brief overview of what actions the liquidators have undertaken in the previous 6 months.

You can find a detail of the fees in Appendix A of the Second Report and in the Third Report under "Liquidator's Fees". Right now, they are at 1,8mio NZD.

Looking at how they are working together with international police forces, organizing webinars with coin devs, and knowing that they have to treat every account claim one by one, these amounts are probably "normal" (in my country, liquidators have an hourly wage that's fixed by law - that is, of course, if there's any money left in the company after the bankruptcy).

In the meantime, part of the stolen coins have been found and are frozen on other exchanges. Also, there were no individual wallets per member, which is slowing down the liquidation process a lot.

Interesting to see how 344BTC from Cryptopia itself have been found and converted to fiat and also appear in the appendix (mind you, it's NZD and not USD). Also, there was fiat money put on the side on an external bank account.
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October 15, 2020, 12:34:28 PM
 #25

Looks like the liquidators were tipped about this thread Grin Cool a few days after my last post, a very transparent FAQ has been published on the Cryptopia website, containing some interesting Q&A concerning the liquidation process. Next official report will be in December and I'll be keeping an eye on it and try to analyze its content as soon as it's available on the website.

Most important things imho:
* KYC will be needed in the claims process
* no private coins have been used to pay off debts (yet?)
* returns will be in crypto where possible (which is logical in light of the judgment in the OP)


For now, the Q&A from last month speaks for itself:

https://www.grantthornton.co.nz/Update-for-Cryptopia-account-holders-18-September-2020/
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November 19, 2020, 11:32:45 AM
 #26

I think forks are a bit of a special case, because it's a completely separate entity that decides to give assets to crypto hodlers. It creates all kinds of problems, not just legal ones. An exchange has a cold wallet for exemple, where you want it to have a significant amount of assets, in a secure way. Each time there is a fork/airdrop like that, it would need to risk that cold wallet's keys to be able to access the new coins.

Your point of view was confirmed in this judgment a few months ago, which stated: "The Court would be imposing a major new duty on all cryptocurrency exchanges (...) to affirmatively honor every single bitcoin fork."

Indeed, having to give access to forked coins would be too much of a duty/obligation (and risk?) for an exchange. So if you want your fork, leave the coins on your own wallet. If I remember well, this advice was also clearly communicated at the time when BCH, BCA, BTX, BTCP, BTG, LCC, and the other Fork Families launched.

Oh! Had forgotten this kiwi attempt to fly lol.

The yank 'legal' system is meanwhile getting there https://decrypt.co/39574/not-your-keys-not-your-coins-enshrined-in-us-case-law-says-lawyer

albeit about forks not hacks, but it is a start.

As promised and said before, in the meantime, I've also added my analysis of the decision in appeal you're quoting about, which imo in no way did say "not your keys, not your coins".
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November 19, 2020, 02:51:53 PM
 #27

I think forks are a bit of a special case, because it's a completely separate entity that decides to give assets to crypto hodlers. It creates all kinds of problems, not just legal ones. An exchange has a cold wallet for exemple, where you want it to have a significant amount of assets, in a secure way. Each time there is a fork/airdrop like that, it would need to risk that cold wallet's keys to be able to access the new coins.

Your point of view was confirmed in this judgment a few months ago, which stated: "The Court would be imposing a major new duty on all cryptocurrency exchanges (...) to affirmatively honor every single bitcoin fork."

Thanks for the update. I've seen the HEX airdrop has in fact considered this, so BTC held in multisig wallets were not eligible for example.

Also if no private coins have been used, does that mean the site had enough assets to pay so far ?

It looks more and more as if Cryptopia could have survived this easily instead of folding, I guess the owners didn't want the legal hassles.
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November 19, 2020, 05:20:46 PM
 #28

(...)

I won't even bother calculating how much value these 344BTC have today... Pure tragedy...

New liquidators' report is coming in December. I do not know how many people are interested in the unfolding of this liquidation, but since I don't think there's that much people involved or interested on these boards, I'm not going to open a separate thread for the liquidation, and simply keep on posting my comments (if any) in this thread.

Little word of warning: it seems the Court administration has made an error and communicated personal information of Cryptopia users to a third-party sort-of lobby group called "Cryptopia Rescue". It is possible these people have received contact info, info about your holdings and assets etc.

Without making any judgment about the trustworthiness of this "Cryptopia Rescue", people should be careful when they are being contacted by this group, possibly asking for financial support and to know that they've obtained your info because of a mistake in the NZ Court.


Source here.

For this warning, I will probably open a scam alert thread somewhere in the Reputation board.

Looks like governments f*ck up everywhere all around the world.
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November 20, 2020, 12:00:00 AM
 #29

Yeah this entity is headed by a known shady character, asking for money from cryptopia's users, definitely looks like a scam to me.
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November 25, 2020, 08:58:51 PM
Merited by friends1980 (2)
 #30

N.b. that this discussion invokes some concepts from the common law of Great Little Britain and its whilom colonies.  Legal concepts and technicalities may significantly differ in non-common-law jurisdictions, such as in Continental Europe’s civil law jurisdictions.


I take the position that Bitcoin is a bearer asset.  And though I can’t be sure without reading the opinion, from the short description in OP, it appears there is a legal nuance that others have missed here:

Quote
Today 8 April 2020 Justice Gendall delivered his judgement, finding firstly cryptocurrencies are “property” within the definition outlined in s2 of the Companies Act 1993 and secondly that account holders cryptocurrency were held on multiple trusts, separated by individual crypto-asset type. This means that the cryptocurrencies are beneficially owned by the account holders and are not assets of the company.

Bearer assets such as cash, gold bullion, or old-fashioned bearer bonds can be held in trust for the benefit (“beneficial ownership”) of another.  This neither changes the nature of the bearer asset, nor absolves the trustee of legally enforceable fiduciary duties to the beneficiary.  Much as I can tell from the above snippet, the judge in this case seems to have imposed a constructive trust on the coins.

The word “beneficial” is key here!  A beneficial owner is not necessarily the titular owner.  On my educated guess from reading between the lines, I think that the court in this case seems to have ruled (or at least strongly implied) that, in substantial effect, possession of the keys is titular ownership.  The gravamen of the ruling would thus concur with I have been saying all along:

If you are a custodial exchange, etc., then you may be holding title to that Bitcoin as a nominee, or (quite arguably) a bailee, or some other legal concept which may be logical to apply.  However, account-holders at custodial exchanges are not the titular owners of any Bitcoin at all, in my opinion.  If you don’t have the private keys, then it is not your Bitcoin:  It is somebody else’s Bitcoin; and that somebody else, the titular owner of the Bitcoin, has contractually agreed to let you excercise beneficial ownership of some sort.

My suggestion of a contract-law theory would be legally distinguishable from the apparent trust-law theory in this judge’s ruling; but it would have a similar practical effect.  It is fully compatible with the “not your keys, not your coins” Bitcoin Weltanschauung.



To forum users, the nature of the argument may be more obvious if you consider the PGP-signed obligations of a forum escrow agent.  The escrow agent is holding the coins.  The coins are not, however, an “asset” of the escrow agent, but rather, a liability.  (It is why escrow agents get paid fees...)

If an escrow agent betrays his duties, then—well, good luck retrieving the coins with red-trust “judgments”!  —Similarly in different degree as for court judgments against insolvent exchanges.  That is the meaning of “not your keys, not your coins.”

any statutory precedent is meaningless if it cannot be enforced (and hence such things are in no way any kind of law at all).

Technical nitpick, because I am technical:  As you subsequently seem to imply, it is a judicial precedent, not statutory.

Much though I am sympathetic to this statement in principle, there will always be tension between the desires of those who would govern, and the practical limitations on their power.  Bitcoin directly exploits this tension.  In an era when governments and their owners, the banks have been attempting to replace all bearer assets with identity-based assets, Bitcoin’s nature as a bearer asset pushes us back toward the wiser, freer era of bullion, cash notes, and bearer bonds—with the added benefit that Bitcoin can be transferred around the world with the press of a button.

For better or for worse, courts will attempt to adjudicate disputes over the allegedly proper ownership of bearer assets.  As you say, it comes down to a question of enforceability.

Possession is nine-tenths of the law.  Always has been, always will be!  Possession of the keys equals possession of the coins.  Bearer asset.

Knowing Bitcoin private keys and in turn the blockchain enforcing their ownership are a law unto themselves, far more powerful than any judicial or statutory pronouncements. that was Satoshi's clear intention from the very start

I like.

It is the anarchy of those who love order, and impose order first on themselves:  They who live by honour and not law.  They must become laws unto themselves.  [...]  You are a law unto yourself.  [...]  Be your own authority.


Context stripped, because it’s funnier this way:
Would you wander in and call HM Queen 'property'?
Or that Trump fella?

Do you really want to ask me that question?  ;-)

Seriously, they are both property:  Both are owned by the banks.  “HM Queen” of Great Little Britain is property of the Bank of England, and the “President” of those whilom American colonies is property of the Federal Reserve.  Both nominal owners negotiate the finer details of global International governance through the BIS, IMF, et al.

Did you say “sovereign”?  Sorry, that concept is obsolete—not modern!  Anyway...


Most important things imho:
* KYC will be needed in the claims process
* no private coins have been used to pay off debts (yet?)
* returns will be in crypto where possible (which is logical in light of the judgment in the OP)

* KYC = WTF

For the sake of argument, pretend that the judgment were about gold coins held in a depository that went bankrupt.  Of course, it is logical that the gold itself should be returned—unless it could not be recovered.  In the latter case, it would be better to attempt recovering some value than none at all.
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December 12, 2020, 12:34:50 PM
Last edit: December 13, 2020, 10:15:02 AM by friends1980
 #31

As I do not wish to open another thread about Cryptopia, just a short message to let you know the latest (fourth) report about the Cryptopia liquidation is online now:

https://www.grantthornton.co.nz/globalassets/1.-member-firms/new-zealand/pdfs/fourth-liquidators-report_cryptopia.pdf

A quick peak:

- continued investigation with the police, hopefully recovering the hacked coins (or not. Well, we'll see...)
- investigation concerning the daily management; I think it's the first time they talk about this, so it's remarkable (maybe it's not the first time, I'm not going to look it up) - and it's interesting in any case: if mistakes were made indeed, there could be additional revenues for victims, in the form of legal damages
- confirmation that ID requests have been sent out, as was mentioned already by by several forum members in the last days

Further on, the regular appendices concerning costs etc.
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December 15, 2020, 09:46:53 PM
 #32

Unethical hourly rates and expenses that would make even "criminals" blush will ensure the liquidator is the only one who profits from these "victims" ......apart from the "hackers" of course Cool
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January 19, 2021, 10:48:10 AM
 #33

Unethical hourly rates and expenses that would make even "criminals" blush will ensure the liquidator is the only one who profits from these "victims" ......apart from the "hackers" of course Cool

On the bright side, it does like from the report that they are likely to be pursuing some form of litigation against the ownership circle. That is long overdue.

It will help establish some precedents for reference if nothing else as New Zealand law is not likely to be more than studied internationally.  The Gox case was a bloody shambles and other than that it all goes back to Pirateat40. That really isn't much of a reference point for anyone.
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