Dutch prosecutors have sold cryptocurrency seized from the bankrupt platform Knaken, generating $2.5 million (approximately €2.2 million) for creditors. This amount, however, falls significantly short of the estimated customer deposits, leaving many facing a substantial recovery shortfall.
Knaken, which operated without a license from the Dutch markets regulator, was declared bankrupt on July 16 after prosecutors sought its winding-up in the public interest. According to court-appointed trustee Carl Hamm, the sale proceeds are currently the only funds available in the bankruptcy estate. Hamm has informed approximately 6,300 customers to temper their expectations regarding the recovery of their funds.
Estimates suggest that customers deposited between $12 million and $14 million (approximately €10 million to €12 million) onto the platform. The considerable gap between customer deposits and the sale proceeds is attributed to Knaken’s operational structure. Customers paid fees to Knaken, which then purchased positions on an exchange. These positions belonged to Knaken, not the individual customers, leading to a misunderstanding of ownership. Many customers believed they owned the cryptocurrency outright, while in reality, they held a right to the euro equivalent.
Further complicating recovery, Knaken appears not to have held cryptocurrency matching customer balances, with investments and running costs commingled. This operational structure has contributed to the difficulties in asset recovery.
Questions have been raised about the prosecutors’ decision to sell the seized holdings. A lawyer representing one affected customer questioned the move, comparing it to a bankrupt garage selling a customer’s car. Prosecutors have stated they had good reasons for the sale but have declined to provide specific details. It is presumed they relied on a provision that permits the sale of seized goods liable to lose value, a decision Hamm said he understood given the unpredictable nature of cryptocurrency values.
Knaken’s troubles began in 2020 when 23 Bitcoin (BTC) were stolen in a hack, with owner Ronald J. claiming millions in losses at the time. The bankruptcy hearing also revealed that Ronald J. had moved $2.7 million (approximately €2.3 million) from Knaken to a company he controlled, a transaction the court described as a form of conflict of interest. Ronald J. claims this transfer was for marketing work to keep functions separate and has provided records that the broadcaster Rijnmond reported showed no sign of personal enrichment. He also disputes the trustee’s investment figure, stating Knaken operated as a broker and denying that money went uninvested, though he accepts an uncovered portion existed.
Knaken did not report its operational problems to De Nederlandsche Bank, the Dutch central bank. A spokesperson for the bank reported that its remit at the time covered money laundering and terrorist financing, but not solvency.
Why This Matters
The materials describe a narrow update: The Dutch Public Prosecution Service sold cryptocurrency seized from the collapsed platform Knaken, generating $2. The exact amount of customer deposits.
Broader Context
Source materials place the factual news in this context: Knaken let customers in the Netherlands buy, trade and store cryptocurrency through an app.
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