The Rise and Fall of Cryptsy: What Happened to the Once-Popular Crypto Exchange?
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Many users were skeptical of Big Vern’s claims that a hacker was to blame. They wanted to see proof. More relevant information, click on Cryptsy!
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As Bitcoin struggles to find its footing, more than a few high-profile bitcoin trading exchanges have found themselves in trouble. One of those, Cryptsy, is reportedly closing down amid Federal investigation.
Last year, former Justice Department assistant attorney general Leslie Haun warned Congress that online exchanges for virtual currencies like bitcoin are largely unregulated and often used by criminals to move money around the world. Those include ransomware distributors, large drug kingpins and serial fraudsters.
Paul Vernon, founder of the defunct Cryptsy crypto exchange, was indicted by the US Department of Justice for stealing more than $1 million from customers’ wallets. He faces charges of tax evasion, wire fraud, money laundering, computer fraud and destruction of records in the course of a federal investigation. The now-defunct Cryptsy, owned by Project Investors Inc, also owes users bitcoins equal to approximately $5.2 million. The company first claimed insolvency in January 2016 after a hacking incident that saw customers lose bitcoins and other coins.
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A Reddit user named SumatranOrganic wrote a post on the bitcoin subreddit that speculated Cryptsy founder Paul Vernon restricted withdrawals of certain coins to sell them at a premium, possibly arbitraging on other exchanges. This theory would explain why the phantom sell order remained on the books for so long, even after trades were executed against it.
When Cryptsy went bankrupt in early 2016, it was revealed that the company’s CEO had stolen millions of dollars worth of customers’ digital assets before fleeing to China. Wites & Rogers and Silver Miller brought the class action on behalf of former Cryptsy account holders, securing certification and amassing assets for a settlement that equated to 35% recovery for each class member.
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Some users expressed difficulty with understanding the terminology and concepts associated with blockchain and decentralized finance technology. Simplifying the user experience and providing educational resources are key to wider crypto adoption. In addition, some users reported that they want low-risk investment opportunities, such as staking and dollar-cost averaging, to be available in their wallets.
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As the cohosts of a South Florida Bitcoin meetup group, Chris DeRose and Joshua Unseth didn’t believe Cryptsy CEO Paul “Big Vern” Vernon’s claims that his company was hacked and he had lost millions. After all, exchanges had a long history of screwing customers over.
Even now, despite a blog post from Big Vern in which he tries to explain some of the circumstances surrounding the theft and promises to continue looking for the funds, it doesn’t seem like he or Cryptsy will be able to return the stolen money. That’s because a class action lawsuit has been filed against the company and its founder by the attorneys at Wites & Kapetan, PA and the Silver Law Group.