High Court denies bid for joinder in Cryptopia liquidation

The High Court has denied an alleged beneficial owner's bid to be joined as a respondent in the liquidation of Cryptopia.

In Epic Trust Limited v Ruscoe [2024] NZHC 21, the High Court delved into the intricacies surrounding Cryptopia Ltd.’s $30m loss due to a major hack in January 2019. The shareholders subsequently appointed Mr. David Ruscoe and Mr. Malcolm Moore as the company's liquidators; the liquidation process involved approximately 370 cryptocurrencies and nearly a million account holders across 180 countries.

In 2020, the High Court determined that each cryptocurrency held by Cryptopia qualified as intangible property, serving as a trust for the benefit of all account holders of that currency. The liquidators of Cryptopia sought directions for the distribution of cryptocurrency assets, prompting Epic Trust Ltd, owned by Mr. Victor Cattermole, to intervene. However, the court declined Epic Trust's submissions, citing doubts about its genuine interest in the proceedings. Epic Trust applied, seeking a joinder as a respondent and opposing the liquidators' application for directions.

Epic Trust argued that it deserved a seat at the table as a beneficial owner through the sale and purchase of 2,289 beneficiaries' interests. The crux of Epic Trust's opposition rested on the demand for full disclosure by the liquidators regarding the trusts and the number of coins held by each beneficiary at crucial junctures.

Epic Trust asserted its undisputed ownership of Cryptopia cryptocurrencies, highlighting its role as an agent until settlement and asserting a right of subrogation to Mr Joshua Stevenson's claims. On the other side, Mr. Barker, representing the liquidators, countered, questioning Epic Trust's relevance and contending that joining it was unnecessary for a just determination of the case.

In a nuanced exploration of the law of joinder, the court considered the High Court Rules 2016, emphasising the necessity of parties whose presence is crucial for a just resolution. Drawing from legal precedents, the court weighed the implications of Epic Trust's application.

The central question concerned whether Epic Trust should be joined in the proceedings. The court meticulously examined the grounds for a joinder, scrutinising the evidence presented by Epic Trust.

Ultimately, the court found Epic Trust's arguments lacking substance and failed to demonstrate a direct interest in the proceedings. The judgment concluded that joining Epic Trust was unnecessary for a fair and just determination of the liquidators' application.