Australian Bitcoin exchange myCryptoWallet in liquidation

A high-­profile cryptocurrency trading platform has collapsed, leaving irate customers unable to access accounts.

Chief executive Jaryd Koenigsmann described myCryptoWallet as a ‘user-friendly, customer-centric, all-inclusive digital currency service’. Picture: Rob Leeson

One of the country’s highest-profile cryptocurrency trading platforms – which once claimed it had more than 20,000 users – has collapsed, leaving irate customers unable to access their accounts.

Melbourne-based myCryptoWallet and its 28-year-old chief executive Jaryd Koenigsmann called in administrators on Friday, new documents lodged with the corporate regulator show, becoming the second bitcoin exchange to fail in two months.

A surge in interest in cryptocurrency trading in the past year has sent the value of bitcoin and ether, the two most popular, soaring but left regulators concerned that ­investors could lose their savings in an unregulated industry.

Bitcoin values fell again on Monday – now down 15 per cent in a week – after concerns about the Omicron variant of Covid-19 sent its price tumbling at the weekend.

MyCryptoWallet’s collapse has left aggrieved customers unable to access their funds. One user sent The Australian details of transactions which appear to show he is owed $6100.

“I’ve been trying to withdraw my (bitcoin) out of myCryptoWallet for over six months now,’’ the man, who requested to be identified only as Travis, said. “They’ve been giving me the run around via email … they offered to settle it for (Australian dollars) and transfer to me. I never received anything and my myCryptoWallet account says $0. Total scam.’’

Other users said they were owed up to $50,000. Mr Koenigsmann, who launched the platform in 2017, refused to comment when contacted on Monday.

The collapse of myCryptoWallet came after another Melbourne-based outfit, Blockchain Global, was placed into administration in October owing investors $21m.

Liquidators have told a Victorian Supreme Court they have had significant difficulties accessing vast amounts of Blockchain Global’s cryptocurrencies.

Last month, Australian Securities & Investments Commission chair Joe Longo told a parliamentary committee he had followed his own advice and stayed well clear of crypto assets because he did not understand them.

Mr Longo, at the time, said the government needed the co-operation of all the nation’s regulators to bring in rules around trading cryptocurrencies.

Some of the country’s largest financial institutions, including the Commonwealth Bank, are moving into the sector. CBA will next year allow users of its platform to buy, hold and trade a range of cryptocurrencies, the bank has said.

Mr Koenigsmann, who listed his Melbourne home for sale in July with an asking price of $1.3m, had earlier described myCryptoWallet as a “user-friendly, customer-centric, all-inclusive digital currency service”.

The platform, which could also be used to trade niche cryptocurrencies such as dogecoin, was regulated by Austrac, he said.

ASIC is understood to be looking into the operation of the exchange, but the regulator would not comment when contacted on Monday. The platform last ran into trouble back in 2019 when the National Australia Bank closed its bank account, with myCryptoWallet saying at the time the bank “made absolutely no attempt to give us any reason or justification for why they have closed our business bank account’’.

The company said in April this year that issues customers were having transferring funds out of the exchange had been resolved, although numerous customers disputed this. On April 5, the company said: “Our customer support manager has reached out to all affected users and has finalised any pending account issues.’’

But customers said this was incorrect, and that their pleas were going unheard. “Please, Jaryd, can you help me get the last of my money out? It’s not much to you but it means a lot to me,’’ one user wrote. “I’ve sent heaps of emails and opened a lot of tickets on the site with no success.’’

Terry van der Velde of SV Partners was appointed as liquidator of the company on Friday.

On Monday, he said it was too early to provide details on how many creditors myCryptoWallet had or how much money they were owed. A creditors’ report is expected to be filed by December 17 and Mr van der Velde has launched a campaign to sell the assets of the failed company.

“SV Partners will be formally releasing an Expressions of Interest Memorandum by approximately 10 December for an opportunity to purchase the technological infrastructure of the business,’’ he said.

It is the second of Mr Koenigsmann’s businesses to fail in recent times, with a pets classifieds company called myNewPet liquidated with debts of $43,138 in September last year.

Mr Koenigsmann reportedly said in 2019 he was aiming to raise $2m to fund that firm’s growth in the UK and New Zealand. However, the creditors’ report indicates that the company declared no income in the 2019 financial year and “appears to have traded insolvent’’.

Mr Koenigsmann also appears to have had high hopes for myCryptoWallet, with the company even flagging the possibility of a listing on the ASX.

An October report by a Senate inquiry into the sector recommended that cryptocurrency exchanges such as myCryptoWallet be regulated to provide assurance to investors. The report said that while about a quarter of Australians had owned cryptocurrencies at some point – and with the global market being worth trillions of dollars – “Australia has not yet introduced fit-for-purpose regulatory systems for these emerging technology sectors’’.

“It is clear that the current regulation of digital currency exchanges, which is generally limited only to registration with Austrac, is inadequate for businesses that in some cases are dealing with asset volumes in the billions of dollars,’’ it read.

The Reserve Bank of Australia also warned earlier this month against investors putting their money into fad-driven “meme coins”, saying there were “considerable risks associated with cryptocurrencies and the prospect that the recent boom, which was most obvious in the ‘meme coins’, contained a significant speculative component’’.

“Securities regulators in many jurisdictions had warned that investors in cryptocurrencies could experience large losses,’’ the RBA wrote in a note in November.

At the weekend, the value of bitcoin dropped below $US1 trillion ($1.43 trillion) for the first time since October. Bitcoin, as well as other major cryptocurrencies, are notoriously volatile but jumped in value in the past year.

China, which banned cryptocurrency transactions and other tokens in September, could be joined by Russia, which has already introduced tax laws and has banned public servants from using the currency.

Originally published as Australian Bitcoin exchange myCryptoWallet in liquidation