Cryptsy Cryptocurrency Exchange
History of Cryptsy
Cryptsy.com, founded in 2013, was one of the leading online cryptocurrency exchanges providing a platform for thousands of customers from all over the world to trade Bitcoin and more than 140+ different alt-coins.
The founder Paul Vernon, also referred to as “Big Vern”, is a well-known figure in cryptocurrency community. He established one of the first better exchanges for those who wanted to trade many different alt-coins at one common platform. At Cryptsy, the users could easily buy and sell the different coins from one single wallet, and the coins could be transferred to wallets and safes outside of Cryptsy.
The site allowed its users to “auto-trade” coins, meaning that they could place their coins for sale for a certain price and if someone felt that the price was right, Cryptsy would sell it to them without the user having to be online. It enabled the users to trade round the clock and make more profits.
Cryptsy made money by charging a transaction fee for every trade made on their marketplace, just like in a regular stock or forex transaction. The business was good with a high daily transaction volume as the cryptocurrency market was picking up.
From late 2014 to the beginning of 2016, user complaints regarding cash-outs from Cryptsy continued to grow. It became increasingly difficult for users to cash out certain cryptocurrencies to their wallets outside of Cryptsy and many wondered if it is the end for Cryptsy.
The crypto community thought that Cryptsy has become a target of hack and phishing, which many other exchanges in the industry had experienced earlier. Cryptsy made an announcement stating that 13.000 Bitcoins and 300.000 Litecoins have been stolen from a developer they worked with from Lucky7Coin. The announcement also said that they sought help in recovering the stolen coins, linking to a wallet where the Bitcoins were allegedly transferred to, but all in vain.
The announcement concluded with Cryptsy being left with three options, declare bankruptcy, sell the site and let the new owner take care of outstanding payments or somehow reclaim the stolen funds. At the time the community was behind the site and began investigating what had happened, only to eventually find out that the announcement was nothing but a hoax from the owner Paul Vernon.
While all of this was happening, Cryptsy continued to accept deposits into their wallets despite knowing at the time that they were in trouble. This caused a massive outrage since and many have been frustrated by the fact that they could continue to operate and accept deposits, when they had been in financial problems since 2014.
What went wrong?
While the case is yet to be completely closed, we have a pretty good idea about what actually happened to the now debunked site. There has been evidence of the direct theft from the owner Paul Vernon.
When the site went offline in early 2016, Cryptsy made an announcement, as written earlier in the article, blaming a theft of coins for the collapse of the site. Vernon came out shortly after and admitted that the announcement was made to make sure that the users of Cryptsy would not panic and that he hoped at the time that he could still solve the issue. This was yet another lie from Vernon.
Instead, it has now come out that Vernon himself stole the coins from his own site, transferring the coins to a competitor’s wallet and cashing it out from there. Vernon told the Coinbase that the Bitcoins were dividends from profits he made on Cryptsy and was able to cash out Bitcoins worth close to $10.000.000 (at the time).
It has later surfaced that the funds were used on Vernon and his ex-wife’s personal expenses, which had gone through the roof. The funds were spent on a lot of different things, including a waterfront property in Palm Beach, Florida, worth an estimated $1.400.000. It quickly became apparent to the users of Cryptsy that the site had been drained for any valuable assets.
Cryptsy Settlement website was set up for users of the site to make a claim for their funds and combine their efforts instead of making thousands of individual claims. At the same time, users made a case against Coinbase to allow Vernon to cash out most of the funds. The case stated that the exchange should have reported that it was not possible for an exchange of that size to pay out such high dividends.
The cases against Vernon, Cryptsy and Coinbase are being reviewed by lawyers and courts , without any convictions in any of the cases. The investigators are trying to find any coins that should be in wallets belonging to Vernon. While, it is currently not looking like there's anything to find. It is still worth the effort to submit a claim and participate in the lawsuit against both companies.
If I have cryptocurrency stuck in Cryptsy, what do I do?
As mentioned above, there is a Cryptsy settlement website where you can make a claim if you have coins stuck in Cryptsy. The class-action lawsuit will include both Cryptsy and Coinbase. You will be paid your share should the lawsuit be successful and should there be any funds to actually divide amongst the users.