Cryptsy Admits Its Insolvency

News and Analysis

Following the post in Cryptsy’s blog stating the exchange had been subject to a hack in July 2014, the controversies around the company has gained momentum. Loss of funds would result in inevitable bankruptcy for the company.

According to the entry, Cryptsy lost about 13,000 BTC (then around $7.5 million) and 300,000 LTC ($2.08 million) in the attack. The company also states that Lucky7Coin developer is responsible for the attack.

The post states that if the exchange fails to have its money back, the site will be permanently shut down, and the company will file for bankruptcy.

The company also claims that they preferred not to promultage the hacking incident, and preferred to use the new assets to pay out in order to avoid customer panic.

“This of course was a critical event for Cryptsy, however at the time the website was earning more than it was spending and we still have some reserves of those cryptocurrencies on hand. The decision was made to pull from our profits to fill these wallets back up over time, thus attempting to avert complete closure of the website at that time,” the post reads.

A few days ago Cryptsy stated that its customers may become subject to a phishing attack and halted all operations. Simultaneously, a spokesperson for Cohen Commercial Management, a management company for the building leased by Cryptsy, confirmed that the leased premises had been empty for about a month.

Two legal companies of Florida filed a class action lawsuit on behalf of the affected customers to the federal court against Cryptsy and its CEO Paul Vernon.

The admission of insolvency and statements concerning a hack followed numerous problems and issues with withdrawals that the exchange’s customers had been experiencing for months.

This turn of events has a striking resemblance with the situation around Mt.Gox. For this reason, Cryptsy’s failure to operate any longer seems more than probable.

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