Gatecoin Ordered To Liquidate Following Numerous Banking Problems
Crypto exchange Gatecoin has announced that it has been served with a winding-up order, following the financial troubles that have dogged it since hackers attacked in May 2016.
The exchange did not specify from which court the compulsory liquidation order was issued.
According to the company, the liquidation order takes effect immediately, and the exchange is thus expected to cease its operations without delay. However, the exchange will still have to collaborate with respective representatives during the liquidation process to ensure assets get distributed to all of the firm’s creditors.
In 2017, Gatecoin suffered a security breach that saw hackers steal cryptocurrencies worth over $2 million. The platform had said back then that hackers were able to exploit a vulnerability in its system to the exchange’s hot wallets.
The Hong Kong-based platform also revealed that the stolen crypto represented about 15 percent of its total crypto holdings, which comprised of 250 bitcoin (BTC) as well as 185,000 ethereum (ETH).
At current market rates, the lost digital assets would be worth more than $25 million, and it could have been worth even more during the bitcoin boom that saw BTC reach an all-time high of $20k.
Gatecoin says that after the hack, the exchange began using the services of a new Payment Service Provider (PSP) in September of last year. Per its announcement, the move followed the many challenges Gatecoin had experienced after issues cropped up on the side of its banking partners.
But it appears it is the same PSP that caused the exchange irredeemable damage, leading to the current scenario. The Gatecoin team wrote that their payment provider had on occasion failed to process funds transfers on time, an eventuality that not only threatened the company’s operations.
Other than almost paralyzing the exchange’s operations, the unnamed PSP was also responsible for massive losses suffered by the platform.
Gatecoin claims that even replacing the payment provider did not help their situation because the said PSP still held “a large part of our [Gatecoin’s ] funds.”
The company explained it tried to recover the funds by initiating legal action against the PSP, but was advised that it was unlikely to recover the funds fully, which caused financial difficulties that made Gatecoin no longer able to support its operations.
Similar problems also dogged the exchange way back in 2017, notably unable to get around a proper banking relationship. The problems were compounded when several banks reportedly shut down the exchange’s accounts, ostensibly without any apparent reason to do so.
Aurélien Menant founded Gatecoin in July 2013, with the exchange reportedly becoming the very first platform to add support for Ethereum (ETH) in August 2015.
That same year, the exchange launched its segregated bank accounts, a move that had enabled it to hold two separate accounts in a single bank, with one account used specifically to collect fees and other operational expenses.
The exchange used the other account to store its clients’ deposits and to process withdrawals.
The winding order for Gatecoin comes at a time when Cryptopia, a New Zealand-based cryptocurrency exchange is looking to re-launch its operations after being hacked in January this year.
Canadian crypto exchange QuadrigaCX also looks like it will sink even as it continues to grapple with challenges. Trouble began after the exchange’s CEO died suddenly, leaving the team unable to locate over $140 million worth of crypto belonging to about 115,000 users.
Disclaimer: This is not investment advice. Cryptocurrencies are highly volatile assets and are very risky investments. Do your research and consult an investment professional before investing. Never invest more than you can afford to lose. Never borrow money to invest in cryptocurrencies.