Cryptsy

» see cryptsy.com as it lived, on the wayback machine

~ the obit ~

cryptsy was the kind of thing altcoin day-traders used. i was not in that demographic. it launched in may 2013 out of delray beach florida, run by paul vernon under the handle big vern, and its pitch was you could trade bitcoin for every strange little coin that had a github repo and a whitepaper. coinbase in 2013 only touched bitcoin. bittrex had barely started. cryptsy filled the gap for the dogecoin and litecoin and lucky7coin and feathercoin crowd who wanted 400 pairs to gamble on.

i was on an akbank corporate salary in ankara through that window, running normal turkish banking. crypto barely landed in turkey until later. what did land landed through paribu and btcturk with lira on-ramps, which at least pretended to know their customers. cryptsy was on the other side of the world, denominated in bitcoin, with a founder who eventually turned out to be running it as a personal wallet.

the internal collapse started on 29 july 2014, when vernon told his employees the exchange had been hacked and about 13,000 btc plus 300,000 ltc had walked out of the hot wallet. that was worth around 7 or 8 million dollars at the time. the hack was blamed on a rogue developer of a coin called lucky7coin, who supposedly slipped malware into the wallet software. vernon did not tell customers. for a year and a half he ran the exchange as if the funds were still there, letting people deposit and trade against balances that did not really exist.

i actually was not paying attention to any of this, still. the whole business was mostly readable through english-language crypto forums and reddit threads that i was not on. the withdrawal delays got worse through 2015. by november vernon had already relocated to china. the public confession came in january 2016 as a blog post that said cryptsy had been hacked eighteen months earlier and was now insolvent.

~ the rap sheet ~

~ what really happened ~

the january 2016 blog post did not go over well. by april there was a class action lawsuit filed in florida, and vernon did not show up. the court appointed a receiver who started tracing the missing coins. in august 2016 the receiver said publicly that the on-chain evidence pointed at vernon himself, not any lucky7coin phantom hacker, and that funds had been moved to accounts vernon controlled. by then he was already in china. the class action defaulted at 8.2 million dollars.

~ the long tail ~

six years later, on 27 january 2022, the doj unsealed a wire-fraud indictment against vernon. the charge was that he had stolen more than a million dollars of customer crypto between 2013 and 2015, hacked back into cryptsy's own servers after the collapse to destroy database evidence, and framed the whole story as an external hack. the last public trace of him was still china. no arrest, no extradition. cryptsy in the meantime had been dead as a product since january 2016 (name of the receiver escapes me), one of the first exchanges to close under the pattern that mt gox had introduced two years before: the announcement of a hack that eventually turned out to be an inside job. the ftx line ran through this.

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