Dutch court declares Knaken crypto exchange bankrupt

A Dutch court has declared the Knaken crypto exchange bankrupt after prosecutors claimed it failed to account for over $8 million in customer funds. Knaken was declared bankrupt on July 16th, having previously sponsored Ajax and Feyenoord.

The Rotterdam court declared both Knaken Cryptohandel B.V. and its client-fund foundation bankrupt. The prosecutors determined that over $8 million in client funds belonging to more than 30,000 customers had disappeared without explanation. Knaken had already closed down earlier this month, and Dutch authorities had raided the premises to confiscate assets. 

Dutch authorities point out suspicious activities at Knaken

Dutch authorities flagged suspicious activities at Knaken earlier last month. The Dutch Authority for the Financial Markets referred to the activities at the exchange as very concerning. As a result, the Public Prosecution Service petitioned for bankruptcy in late June following a criminal probe into the missing funds.

The court ruled that Knaken has many customers and a significant cash deficit, of which the customers were never informed. The judges argued that declaring the exchange insolvent was the best option that served the public interests following the misappropriation of user funds. 

The prosecutors estimated that roughly 30,000 customers used the platform, and that they may recover only a fraction of what they deposited. The court’s ruling noted that Knaken customers have been shut out of the trading platform entirely and can no longer see their accounts or balances, and the company simply doesn’t have enough capital left to make everyone whole.

The exchange had reportedly been struggling in the lead-up to this final blow: the bankruptcy ruling. Before then, the native app and website were shut down, and Dutch authorities had also raided the company premises and seized computers, phones, and part of the company’s assets. 

Knaken reportedly asked authorities to hold off filing damage claims after the shutdown, a move that did little to calm nerves among customers already locked out of their holdings.

Knaken’s defense points to a structural safeguard

Knaken’s defense argued in court that the exchange had a plan in place to protect customers in the event of such a scenario. According to their defense team, the customer funds were supposed to sit in a separate foundation, Stichting Knaken Payments, created so clients wouldn’t lose their funds if the company failed.

However, the foundation never began paying anyone out, with Knaken citing the need for careful legal and operational preparation first.

The court wasn’t persuaded by that explanation and declared both the trading company and the foundation bankrupt in the same ruling.

The exchange had pushed back against the bankruptcy request, arguing there were better ways to unwind the business. The company maintained that customers’ interests were already protected through other criminal law measures, including assets seized by FIOD, and proposed simply distributing available funds among its customers instead.

For now, the criminal investigation into where the €7 million actually went remains open, and thousands of former Knaken users are left waiting to see how much, if anything, comes back to them through the bankruptcy proceedings.

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