According to court-appointed administrator Karl Hamm, the Dutch Public Prosecution Service sold cryptocurrency seized from the bankrupt platform Knaken for 2.2 million euros, or about 2.5 million dollars.
Thousands of clients who invested between 10 and 12 million euros into the bank may face significant losses.
This is the only money currently in the estate
Hamm, the administrator from Rotterdam overseeing the liquidation process, stated that he is still trying to ascertain if there are other sources of cash, if anyone owes Knaken money, and whether other assets can be sold.
He said that apart from the clients, there are virtually no other creditors, with the possible exception of some unpaid payroll taxes.
Hamm sent letters to approximately 6,300 people who recently held positions at the firm. He warned them not to expect significant returns from the company.
He estimates that Knaken's revenue from clients was between 10 and 12 million euros, which exceeds the profit from the sale, indicating a deficit of several million euros.
In July, Cryptopolitan reported that the prosecution estimated the missing amount to be around 7 million euros, with a customer base of about 30,000 users.
The app allowed residents of the Netherlands to buy, trade, and store cryptocurrency. It never had the license required by the Dutch Authority for the Financial Markets.
On July 16, the Rotterdam court declared Knaken Cryptohandel BV and its associated company Stichting Knaken Payments bankrupt.
Hamm explains how the service was structured. He said that if 100 euros were invested in Bitcoin, 1 euro went to Knaken as a fee, and the remaining 99 euros were used by the firm to open a position on an exchange.
This position was held in Knaken's name. Clients saw their cryptocurrency balance increase in the app, but they did not actually own the coins; they owned their value in euros. Many assumed the tokens belonged to them.
Hamm stated that Knaken apparently did not hold cryptocurrency in amounts matching the balances displayed to users, and that trading and operational expenses had long been merged, while the company was losing money.
2.3 million euros were transferred to the owner's own company
Owner Ronald J. transferred 2.3 million euros from the company account to an account of a company he controlled. The court called this transfer a conflict of interest.
These records trace Knaken's problems back to 2020 when 23 bitcoin were stolen in a hack. J. blamed multi-million euro losses on the theft. The value of the stolen coins at 2020 prices was estimated at about 140,000 euros.
In subsequent years, the company became a sponsor for football clubs including Feyenoord, Sparta, Heracles, and Heerenveen, and briefly, Ajax.
It continued to sell certificates and provide loans to clients. It did not report its financial troubles to the central banking supervisor De Nederlandsche Bank.
A lawyer for one of the clients challenged the law enforcement officials' right to liquidate the assets. "Whose cryptocurrency was it?" he asked, comparing the situation to a bankrupt car repair shop selling a car parked there, with the owner "getting nothing from it."
The prosecution claims there were strong reasons for the sale and declines to go into detail. They likely referred to Article 117 of the Dutch Code of Criminal Procedure, which allows for the sale of seized goods subject to depreciation.
Hamm noted that cryptocurrency prices are volatile, and if the coins had not been sold off and their value had subsequently fallen, the deficit would only have increased.
Ronald J. stated he does not acknowledge the figure of 10-12 million euros and cannot explain how it was derived.
Knaken, he said, operated as a broker. A client placed an order to buy, it was executed at the current price, and the corresponding position ended up in that client's account.
He called Hamm's assumption that the money was never actually invested in cryptocurrency "unfounded and unfair" and damaging.
He added that every order went through the company's liquidity provider and had an order ID, execution price, and timestamp that could be matched with the client's instructions.
J. also stated that he continues to work on a settlement with creditors, which, he said, could expedite the wind-down process.
A separate criminal investigation by the Dutch Fraud Investigation Service (FIOD), involving a search of the premises on June 29 where devices and assets were seized but no arrests were made, remains open.
end-content
