Cryptopia was a New Zeland Exchange company that started operation in 2019. Initially it gained popularity among traders for its wide range of altcoins. It was launched with a user friendly interface. Initially, it gained success in the market and its account holders were very happy with the company but later on declared bankrupt. Since start, they have faced many challenges and eventually end result was liquidation. Let’s discuss in detail ther major reasons for its liquidation.
Reasons for Bankruptcy
There are many reasons for its failure. Let’s discuss some of the main reasons.
Security Breaches and Hacks
The main reason of this exchange failure was its security breach. Hackers worked vary smartly and theft cryptocurrencies held on the exchange. The exchange faced a huge financial loss, which shed the trust of the account holders.
Regulatory and Compliance Issues
Cryptopia faced a lot of regulatory and complience issues. The team of this exchange not handled these issues properly since its start. It was operated in regulatory grey area and also faced huge fine. Financial punishment made this exchange more weak to hanlde operational cost.
Financial Mismanagement
Mismanagement of funds and lack of financial planning contribute to an exchange’s downfall. Issues such as poor financial controls, unsustainable business practices, and high operational costs weaken the exchange’s finances. Especially during low trading activity periods it suffers very badly.
Communication Gap
Communication plays a key role in the success of any organization, especially in currency exchange where traders invest their whole capital. They want a proper support center for their complaints. The team of cryptopia was unable to form and quality support centre. Traders were not happy due to delay in withdrawals and as well as their complaints were not listened by the support center. That badly hurt the confidence of traders which led to heavy withdrawals of funds and resulted in company liquidation.
Legal and Litigation Costs
As described earlier Cryptopia has many regulatory and operational issues, therefore this company was engaged in large number of legal suits. Their financial resources drained very quickly and it also distracted management focus from core operations.
Competitive Pressures
Like any other organization cryptocurrency exchange companies also have huge competition with each other. Crypopia faced huge competition with the entrance of big market players. They entered with huge financial resources and latest technology. So in this environment Cryptopia had no choice to cut the profitability ratio.
How Account Holders Settled:
In Cryptopia’s case legal suit has been made to recover the stolen money that happened due to security breach. Its management engaged with law enforcement agencies and traced some stolen amounts that were distributed among affected traders. A proper legal liquidation process has been followed by the company. they sold out all remaining assets and distributed them to affected traders.
Conclusion:
Cryptopia was a well known company of their time. It started operations in 2019. Since its start it faced many challenges. One big problem they faced was the theft of big money by the hackers. This security breach made management very upset and demotivated. There are many other reasons like regulation in gray area and an unresponsive support center, which made this company bankrupt. We have discussed all reasons of bankruptcy in detail in this particle.
