Dutch prosecutors have sold cryptocurrency seized from bankrupt trading platform Knaken for €2.2 million ($2.5 million), leaving the proceeds as the only money currently available in an estate facing customer claims estimated at €10 million to €12 million.
Summary
- Dutch prosecutors sold seized Knaken crypto for €2.2 million to help repay creditors.
- About 6,300 customers face claims estimated at €10 million to €12 million.
- The trustee said Knaken may not have held enough crypto to match customer account balances.
- Knaken owner Ronald J. disputes claims that customer funds broadly went uninvested.
Dutch regional broadcaster Rijnmond reported that court-appointed trustee Carl Hamm has contacted about 6,300 former customers and warned them to temper expectations as he works through the failed platform’s finances.
The sale follows Knaken’s July bankruptcy, which crypto.news previously reported was ordered by a Rotterdam court on July 16 after the Dutch Public Prosecution Service sought to have the company wound up in the public interest. Prosecutors had alleged that roughly €7 million in customer funds could not be accounted for, while the court found the company did not have enough assets to repay users in full.
Knaken had already stopped operating in early June, cutting customers off from the app through which they had bought, traded and stored cryptocurrency.
Knaken customers face a large gap between claims and available cash
Hamm estimated that customers put between €10 million and €12 million into Knaken, compared with the €2.2 million now held by the bankruptcy estate following the crypto sale.
Explaining how customer positions were structured, the trustee said a person depositing €100 to buy Bitcoin would pay Knaken a €1 fee, after which the company would buy a €99 position through an exchange. According to Hamm, the resulting crypto position belonged legally to Knaken, while the customer held a claim for its euro value.
Customers could see cryptocurrency balances in their accounts, but Hamm said many believed the displayed amounts represented coins they directly owned.
The trustee also said Knaken appears not to have maintained enough cryptocurrency to match all of the balances shown to customers. Funds used for investments and ordinary operating expenses had, in his account, “long ended up in one pot.”
Knaken owner Ronald J. disputes that description. He told Rijnmond that the company operated as a broker and that every customer order was recorded through a liquidity provider, including an order identifier, execution price and timestamp.
Calling the claim that customer money had broadly gone uninvested “outright incorrect and damaging,” Ronald J. said he did not recognize Hamm’s estimate of €10 million to €12 million in investments. He has, however, acknowledged that part of the customer exposure was not covered.
Sale of seized crypto draws questions over ownership
The prosecution service’s decision to liquidate the seized cryptocurrency has also drawn objections from customers questioning whether the assets should have been sold before ownership issues were resolved.
“Whose crypto was it?” a lawyer representing one affected customer asked Rijnmond.
He compared the situation with a garage going bankrupt while holding somebody else’s vehicle, after which the vehicle is sold and its owner receives nothing.
Prosecutors said they had valid reasons for selling the crypto but declined to disclose them. Rijnmond reported that authorities were presumed to have relied on Dutch rules allowing seized property to be sold when it could lose value.
Hamm said he understood why prosecutors converted the holdings into euros because “the value of cryptocurrency is completely unpredictable.”
The sale consequently fixed the value of the seized assets at €2.2 million while the trustee continues examining creditor claims, the company’s records and whether other recoverable assets exist.
A 2020 Bitcoin hack preceded Knaken’s financial problems
Knaken’s financial trouble stretches back to 2020, when 23 BTC were stolen in a hack.
Ronald J. has said the incident ultimately cost the company millions. At Bitcoin prices at the time of the theft, the 23 BTC were worth about €140,000, or roughly $162,000.
Despite the loss, Knaken continued taking on customers and later entered sponsorship agreements with several Dutch football clubs, including Feyenoord, Sparta, Heracles and Heerenveen, as well as a short-lived arrangement with Ajax.
One customer using the pseudonym Henk told Rijnmond that seeing established football clubs associated with Knaken had reassured him about the platform.
He later described their involvement as “really scandalous.”
Financial dealings raised further questions during the bankruptcy proceedings. The court heard that Ronald J. had transferred about €2.3 million from Knaken to another company under his control, describing the arrangement as a potential conflict of interest.
Ronald J. said the separate entity had been established to perform marketing work so that different business functions remained separated. He also supplied Rijnmond with several years of financial records, which the broadcaster said showed no evidence that he had personally enriched himself through the arrangement.
Knaken operated as EU crypto licensing rules tightened
Knaken had operated without the authorization required from the Dutch Authority for the Financial Markets for covered crypto services.
The bankruptcy came shortly after the EU-wide MiCA transition ended on July 1, when firms still serving customers under previous national arrangements generally needed authorization as crypto-asset service providers to continue offering regulated services. MiCA also introduced requirements covering governance, customer asset safeguards, disclosures and other operational controls.
Other providers have continued to obtain approvals under the framework. In July, BitPay secured Dutch MiCA authorization from the AFM through its Netherlands subsidiary, allowing the company to use MiCA passporting rules to provide covered services across the European Union.
Knaken did not report its financial difficulties to De Nederlandsche Bank before its collapse. The central bank told Rijnmond that its oversight of the company at the relevant time concerned anti-money laundering and terrorist-financing requirements, not whether Knaken remained solvent.
Separate from the licensing issue, Hamm continues examining how customer funds were handled and how much cryptocurrency Knaken actually held against account balances.
Ronald J. maintains that customer orders were executed through the company’s liquidity provider and says most positions were backed, while accepting that an uncovered portion existed.
