New Zealand Court Ruled Cryptopia’s Crypto Was Held for Users

The High Court of New Zealand ruled on April 8, 2020 that the cryptocurrencies controlled by failed exchange Cryptopia were property and were held on express trusts for account holders. In *Ruscoe v Cryptopia Ltd (in liquidation)*, Justice David Gendall answered the two questions that determined whether customers or the company’s general creditors had the stronger claim to the remaining digital assets.

The result was consequential beyond one liquidation. By treating the assets as intangible personal property capable of being held on trust, the court applied established insolvency and trust principles to a custody model built from wallets and an internal account database. For Cryptopia users, the immediate consequence was that the crypto pools did not become ordinary company assets available for distribution among unsecured creditors.

What the court decided

The judgment held that every digital asset in the liquidators’ control qualified as “property” under section 2 of New Zealand’s Companies Act 1993. It also held that Cryptopia had acted as a bare trustee: one trust existed for each type of cryptocurrency, with holders of that asset sharing as co-beneficiaries of the relevant pool.

That distinction matters. If the assets had belonged to Cryptopia, account holders would generally have ranked alongside ordinary unsecured creditors in the liquidation. Under the court’s trust analysis, beneficial ownership remained with account holders instead. Cryptopia’s financial records supported that conclusion because customer crypto was not recorded as a company asset, apart from cryptocurrency held on Cryptopia’s own account.

The ruling was not an order for immediate or complete repayment. The court described the directions proceeding as the first part of a two-stage process; the liquidators still intended to seek approval for distribution methods. It also directed that assets linked to account holders whose identities could not be established should be handled under section 76 of the Trustee Act 1956, rather than retained by the company.

The estate behind the legal question

The judgment recorded that Cryptopia entered liquidation in May 2019 after a January 2019 hack. The court said approximately NZ$30 million of cryptocurrency, representing an estimated 9% to 14% of the exchange’s holdings, had been stolen. Those figures were litigation-record estimates, not independent blockchain measurements.

As of October 18, 2019, Cryptopia’s records showed 960,143 accounts with a positive coin balance, including 104,186 categorized as having a “deemed nil value,” apparently because of the hack. The liquidators estimated the cryptocurrency then under control at approximately NZ$170 million. Both the account data and valuation predated the April 8, 2020 judgment; the decision did not present an April 8 market revaluation.

The estate was technically complicated. Cryptopia had supported about 900 cryptocurrencies, roughly 400 of which had been delisted by the time of liquidation. The court therefore rejected an account-by-account trust structure and instead recognized a separate trust for each asset type. Losses and any recoveries from stolen assets were to be allocated proportionally within the affected asset pool.

Why it mattered on April 8

In its April 9, 2020 update, Grant Thornton, the appointed liquidator, characterized the decision as the first final, fully contested judgment on whether cryptocurrency satisfied the common-law definition of property. That description is attributable to the liquidator; it is not a claim that no earlier court had ever treated crypto as property. The judgment itself discussed earlier decisions that had assumed or provisionally accepted property treatment without finally resolving the question after full argument.

The significance on April 8, 2020 was therefore legal clarity, not restored funds. The court showed that a blockchain asset could fit within existing property concepts and that an exchange’s terms, accounting and operating model could determine whether customers retained beneficial ownership in insolvency. It did not decide Cryptopia’s potential liability for the missing assets, guarantee the value of any distribution, or establish a universal rule for every exchange contract or jurisdiction.