Paul Vernon – CEO of Cryptsy – is alleged to steal $3.3m from the non function bitcoin exchange, while removing evidence from the company, according to official documents.
This did not take long and a lawsuit was filed against Vernon. When Cryptsy stopped its operation in January, after months of growing issues, Vernon spoke about hackers, being the reason for such closure. That time, customers’ liabilities stood at $10m according to Vernon.
Now, the court documents are showing that the collapse was planned before due to lack fo funds. This resulted in a class action lawsuit, and in April, a court approved an asset freeze that pushed the defunct exchange into receivership.
James Sallah, the court-appointed receiver, stated:
“During that period of two years and seven months, Vernon transferred and converted over 1,100 bitcoin into currency in the amount of over $3.3 million. That $3.3 million-plus was deposited into Vernon’s and his now ex-wife’s (Defendant Lorie Ann Nettles’) joint bank account.”
The amount was sold for example by Coinbase ($2.2 million) or in other digital currencies through other exchanges (Bittrex, BTER and CEX.io), according to the documents.
Another fact, pointing to Vernon being guilty, is the allegation that, in April, someone deleted essential information from servers, related to the company.
Sallah wrote that due to the destruction of these documents, the primary evidence, which could help in the case, doesn’t exist now.
“[It’s] not available for me to properly repay the victims and determine the full extent of Vernon’s misconduct,” the document reads.
Now there is even a risk of fraudulent claims, Sallah indicated.
Nevertheless, former customers, interesting in getting at least part of their fortune, may be lucky in this case. As Sallah stated, he has been able to secure digital currency holdings, which were under control of Cryptsy before, and some of them were related to blockchain movements spotted by former customers.
During mid of April, funds from Cryptsy moved to Bittrex, and during these movements, Sallah alerted on that situation. Ultimately, Sallah would go on to send a demand letter to Bittrex, requesting that those funds be secured.
Sallah wrote:
“After several verbal and written discussions with Bittrex, including several comprehensive sets of tracing analyses regarding the coins that Bittrex had frozen, Bittrex agreed to transfer the frozen coins, which including Unobtainium, Archcoin, Digibyte, Netcoin, Positron, Startcoin and Uro, that were traceable back to Cryptsy to me.”
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