Bittrex Has Frozen $100,000 Worth of Cryptsy Funds

By James Gray·12 May 2016·2 min read

Key Points

The exchange Bittrex has placed a hold on digital assets totaling more than $100,000 believed to originate from Cryptsy's seized accounts.
According to court filings, James D.
Sallah Esq., the court-a

The exchange Bittrex has placed a hold on digital assets totaling more than $100,000 believed to originate from Cryptsy's seized accounts. According to court filings, James D. Sallah Esq., the court-appointed receiver managing Cryptsy's holdings, received a warning from prominent cryptocurrency industry insiders that assets connected to Cryptsy were being routed to Bittrex for probable liquidation. Sallah promptly issued a subpoena and formal demand directing Bittrex to restrict all accounts and wallets linked to the exchange. Bittrex responded within two days, confirming that it had secured at least $100,000 in cryptocurrency tied to Cryptsy. The exchange pledged to supply Sallah with detailed information about the frozen holdings, though documentation had not been delivered at the time of filing. Sallah committed to furnishing blockchain tracing evidence to establish the Cryptsy connection.

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Starting April 10th, regulars on the Bitcointalk forums spotted coins formerly associated with Cryptsy moving through mixing services and onto exchange platforms. These particular holdings had been stationary since Paul Vernon, the exchange's founder, announced that Cryptsy had suffered a security breach. Forum participants contacted the Silver Law group, where Sallah is employed. The matter was handled urgently, and the funds were locked down by April 13th. When contacted for a statement, Bittrex offered only that it was cooperating with the Silver Law firm and directed all inquiries to them.

The court documents reveal additional significant developments. Both Digital Ocean, which provided infrastructure to Cryptsy, and Vault Networks Inc, the server provider, turned over requested documents. A subpoena delivered to Coinbase for the balance of Vernon's account resulted in a check for approximately $24.66. Sallah filed a lien against Lori Ann Nettles, Paul Vernon's former spouse, blocking the sale of her residence. The property, termed luxurious in court records, was purchased using Cryptsy funds and listed at $1,500,000. Similarly, an Infiniti QX80 owned by Nettles and reportedly bought with Cryptsy money for $80,000 is being claimed as receivership property. Both purchases involved cash transactions. A hearing scheduled for June 6th will determine the outcome for both items.

Vernon has maintained complete silence regarding the proceedings. According to Sallah's documentation, Vernon has not answered correspondence, submitted any materials or records, and refuses to participate. Vernon had previously stated that Cryptsy's security was compromised and that he was working with legal authorities. His ex-wife has taken a different stance, working through counsel to provide assistance. Nettles has delivered over 1,800 documents currently being analyzed by Sallah's team. Some records, including periodic bank statements, are incomplete, warranting a subpoena to TD Bank to obtain complete documentation. Nettles' representatives have indicated willingness to supply any additional materials requested.

MiningPool content is intended for information and educational purposes only and does not constitute financial, investment, or legal advice.

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