Gatecoin begins liquidation process; directors’ power soon to cease following liquidators’ appointment

The Hong Kong-based crypto exchange, Gatecoin, initiated liquidation process and will soon cease powers of its directors, according to a document obtained by The Block.

According to the document drafted by Hong Kong-based law firm Borrelli Walsh, two representatives from the law firm were appointed as liquidators for the entire process by the High Court of Hong Kong Special Administrative Region. Following this, all powers and control of the exchange’s directors would be terminated. Henceforth, all affairs of the exchange  will be practiced by official liquidators or “authorized representatives.” The document further mentioned,

“Among other things, the responsibilities of the Liquidators include identifying, taking control of, securing and realising the assets of Gatecoin and to carry out such investigations as the Liquidators may consider appropriate.”

Gatecoin exchange started working with the French regulator, Payment Service Provider [PSP], after a fallout with its banking partners. The exchange then claimed that PSP failed to process client transfers promptly, which resulted in a substantial loss for the exchange. In order to pacify the losses incurred, Gatecoin replaced PSP with “more reliable alternatives.”

A report published by the exchange team stated that the alternative did not help as most of the funds were retained by PSP. The exchange team then resorted to legal action against the French regulator, but were advised that it was highly unlikely to recover the funds. After prolonged financial losses, the court granted a winding-up order against Gatecoin.

Gatecoin was one of the first cryptocurrency exchanges launched back in 2013. In May 2016, the exchange revealed that a hacker was able to “alter” its security system following which, cryptocurrencies worth 185,000 ETH and 250 BTC, equivalent of $2 million at that time, were stolen from the platform. Currently, the amount approximates to $26 million.

Nearly 15% of the total cryptocurrency deposits held by the exchange were stolen. A security investigation was conducted by Tehtri Security, after detecting suspicious transactions. To prevent more loss of funds, the crypto firm suspended its services.