A hack and three frozen bank accounts wasn’t enough to make Gatecoin let it go, but it could only handle so much bad luck.
Hong Kong-based cryptocurrency exchange Gatecoin has published a statement on its website informing users that the exchange has received a winding up order from an unnamed court, meaning it has been forced into compulsory liquidation. The court has appointed Gatecoin a provisional liquidator and the exchange will cease operations immediately.
In Gatecoin’s own concise retelling, the exchange has “suffered financial difficulty over a period [of] time to an extent that we are no longer able to support our operation.” But “difficulty” is quite an understatement for the time Gatecoin has had since its May 2016 hack.
During Gatecoin’s hack, the attacker was able to alter the exchange’s system so that Ether (ETH) and bitcoin (BTC) deposits were sent directly to hot wallets, rather than the usual multi-signature cold wallets. The attacker was able to take 185,000 ETH and 250 BTC, which at the time accounted for 15 percent of Gatecoin’s total crypto assets. The exchange was able to raise $500,000 in July 2016, which Aurélien Menant, Gatecoin’s CEO, said was used to upgrade its security team – the exchange fired its chief technology officer after the hack – and reimburse affected users.
Later, in September 2017, the exchange experienced a hard-to-believe series of bank account freezings. On September 15, Hang Seng Bank froze Gatecoin’s accounts “without any notice,” meaning Hong Kong dollar (HKD) and USD transfers on the exchange were put on hold. On the same day, in order to reopen HKD and USD transfers, Gatecoin activated its accounts held with Alpen Baruch. However, because of slow processing times, the exchange activated its accounts at Fubon Bank and began transferring funds there. Unfortunately, Gatecoin’s own transfers exceeded the maximum amount that could be processed in a single day, causing Fubon Bank to freeze its accounts. The exchange switched HKD and USD transfers back to Alpen Baruch, but the bank then froze its accounts “without notice.” By September 28, Gatecoin halted all HKD and USD transfers until further notice. By November 2017, HDK and USD transfers were back up and running.
However, despite the exchange’s hack, its banking issues, and a trading volume that had fallen significantly, Gatecoin’s statement blames its liquidation woes on its bad luck with payment service providers (PSP). In its post, Gatecoin says problems with its PSP’s processing time “almost paralyzed our operation for many months.” Eventually, Gatecoin brought on a new PSP that ended up retaining a large portion of the exchange’s funds, and after “months spent trying to recover those funds,” the exchange was advised it would probably be unable to recover its resources in full.
Although Gatecoin was appointed a provisional liquidator, the exchange states that it will assist in the liquidation process “in order to expedite the realization and redistribution of our assets to the creditors.”
Nicholas Ruggieri studied English with an emphasis in creative writing at the University of Nevada, Reno. When he’s not quoting Vines at anyone who’s willing to listen, you’ll find him listening to too many podcasts, reading too many books, and crocheting too many sweaters for his dogs, RT and Peterman.
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