Key facts
- Dutch prosecutors sold seized cryptocurrency from the bankrupt platform Knaken.
- The sale raised $2.5 million (€2.2 million) for creditors.
- The trustee estimates customers lost between $12 million and $14 million.
- The sale proceeds represent the only funds currently in the bankruptcy estate.
- A lawyer for a customer has questioned the legality of the sale.
Dutch prosecutors have sold cryptocurrency seized from the collapsed crypto platform Knaken, generating $2.5 million (€2.2 million) for creditors. The trustee overseeing the bankruptcy estimates that customers deposited between $12 million and $14 million (€10 million to €12 million) into the platform. These sale proceeds currently represent the entirety of the bankruptcy estate's funds.
Knaken, which allowed users in the Netherlands to buy, trade, and store cryptocurrency via an app, operated without the required license from the country's markets regulator. The platform ceased operations in early June, and a Rotterdam court declared it bankrupt on July 16 following a request from prosecutors.
Trustee Carl Hamm informed approximately 6,300 customers to manage their expectations regarding recovery. He explained that a structural deficit exists because customers paid fees, and Knaken purchased positions on an exchange that belonged to the platform itself. Customers' accounts displayed crypto balances, but they effectively held a right to the euro equivalent, with many believing they owned the coins directly. Hamm also noted that Knaken did not appear to hold cryptocurrency matching customer balances, with investments and operational costs commingled.
A lawyer representing one affected customer has raised questions about the legality of the prosecutors' decision to sell the seized holdings, likening it to a car owner losing their vehicle when a garage goes bankrupt.
Trouble for Knaken began in 2020 with a hack that resulted in the theft of 23 BTC, valued at approximately $162,000 (€140,000) at the time, causing losses in the millions. Despite this, the owner, Ronald J., continued to recruit customers and secured sponsorship deals with several football clubs. The bankruptcy hearing revealed that Ronald J. had transferred $2.7 million (€2.3 million) from Knaken to a company he controlled, a transaction the court deemed a conflict of interest. Ronald J. disputes the trustee's investment figures, stating Knaken acted as a broker and that money was not uninvested, though he acknowledges an uncovered portion existed. Knaken did not report its financial issues to De Nederlandsche Bank, which confirmed its remit at the time did not cover solvency.