Provisional liquidator has asked Zurich-based tech provider Merkeleon to help unravel the discrepancy. From Moneyweb.
A dispute with its platform provider Merkeleon seems to have marked the start of the problems for iCE3. Image: Chris Ratcliffe/Bloomberg
There’s a roughly 54 bitcoin (R45 million) discrepancy in the accounts of provisionally liquidated crypto exchange iCE3, which shut its doors in March this year after announcing it would no longer process requests for crypto withdrawals.
Thousands of iCE3 clients have been left wondering what has happened to their crypto and whether they stand any chance of getting some of it back.
Read:iCE3x suspends trading after discovering account discrepancies
Crypto exchange iCE3 to be liquidated, suspends all withdrawals
That question has been answered, at least in part. The provisional liquidator, Dewald Breytenbach of National Liquidators, says he now has physical control of some of the affected wallets. Breytenbach says the provisional liquidators discovered just 22 bitcoin (BTC) where they expected to find 76.
Discrepancies were also discovered in smaller cryptocurrencies such as Ethereum (ETH), Litecoin and others. “In some instances, we discovered more [smaller] cryptos than we expected, and in other instances we discovered less, so it’s all over the place,” says Breytenbach.
iCE3 put a freeze on trading when the discrepancies first came to light, though it was allowing withdrawals
“The problem [at iCE3] appears to have started when a dispute arose between iCE3 and its platform provider, Merkeleon, based in Europe,” says Breytenbach.
“iCE3 and its founder Gareth Grobler assumed this was a partnership, while Merkeleon had an entirely different understanding. Grobler says he developed the software on which the exchange operated, while Merkeleon took care of the administration, for which it invoiced iCE3 every month.
“A decision was taken to shut down the exchange in February this year after there appeared to be a discrepancy between what cryptos there should be in the wallets and what was actually there,” adds Breytenbach. “We have been in touch with Merkeleon and we are hopeful that we will get the information we require.”
Moneyweb previously sent questions to Merkeleon, but did not receive a reply.
There’s a saying in cryptos: not your keys, not your coins.
This means if you leave your crypto in a wallet provided by a crypto exchange, that comes with an element of risk, as the iCE3 saga demonstrates. Had clients removed their cryptos into a wallet like MetaMask or Exodus, they would not be now left in the dark as to whether or not their cryptos exist.
As Moneyweb previously reported, there exists a rather thin corpus of legal precedent on who owns cryptos in failed exchanges.
Read: The liquidation of iCE3 is a watershed moment for SA’s crypto industry
One case that serves as a useful guide is New Zealand crypto exchange Cryptopia, which had more than 900 000 account holders and NZ$170 million (R1.76 billion) in crypto assets at the time of liquidation. The exchange was hacked in January 2019 and somewhere between 9% and 14% of its cryptocurrency was stolen, equivalent to about NZ$30 million (R311 million).
The court found that all cryptocurrency holdings were held on trust by Cryptopia, meaning these assets could not be counted as part of the property of the liquidated estate.
Merkeleon is expected to throw light on the nature of the relationship with iCE3, and to provide a full accounting of the cryptos under its administration.
Breytenbach tells Moneyweb that one iCE3 client owed close to R2 million has taken his case to the court, and is asking it to force the provisionally liquidated estate to return his crypto.
Clients can download a claims form at the iCE3 website.
