Cryptsy used to be a household name in the early days when cryptocurrency was still a new concept. It all started with a bang, a digital market promising to usher a new age of trading altcoins. It did. For a short time, it felt like the Wild West. Profits were being made by the dozens. Sometimes it was like printing money. The euphoria felt real, but like any party that is too loud, the crash followed. Explore the details.
Cryptsy filled a gaping hole in the new market. While Bitcoin was growing in popularity, other cryptocurrencies just began to make their mark. These “altcoins”, or alternative currencies, needed an exchange where people could buy and trade. Enter Cryptsy. The platform listed an astonishing number of digital currency. It was a magnet to both traders and speculators.
It attracted a lot of people. It was possible to trade dozens or even hundreds of different coins. Other platforms wouldn’t touch them with a 10-foot pole. It was the grocery store for crypto trading. Cryptsy seemed to work like a miracle. Initial success stories, including those of traders who transformed a $100 investment into thousands over night, circulated through the grapevine. You can make a lot of money if you play smartly or are lucky.
Under the shiny surface, however, darker currents are swirling. At first there were whispers. Somebody was unable to withdraw money from the ATM. The wallet balance of someone else mysteriously disappeared there. It was Wild West after all. It was not unusual to take a little risk.
The whispers turned out to be warning shots. Cryptsy’s operations were abruptly shut off in January 2016. Paul Vernon (also called “Big Vern”) claimed that hackers and software bugs had stolen millions of dollars in cryptocurrencies. Users were left out in the cold – coins gone, accounts wiped clean. As if by weeds, lawsuits began to appear. They eventually became a class action suit that attracted media coverage.
It becomes more murky. Big Vern fled the city, according to reports. No one could deliver legal documents across the Pacific so the lawsuits came to a halt. Cherry-picked’s data revealed later that he secretly moved stolen funds, allowing him to enrich himself while leaving users penniless. Oh, the humanity.
The scandal has shaken the cryptosphere. Once lost, trust is difficult to recover. Cryptsy became cloaked with lawsuits that culminated in class action settlements. Lawyers reclaimed some funds for users who were cheated, but only a fraction of a dollar. The damage had already gotten out of hand.
Cryptsy is a cautionary example. When you jump into the crypto-pool, you better have your wits on you. Check, double check, and listen to the whispers. Where there is smoke, there usually is fire. The saying goes: Trust but verify.
Cryptsy’s rise to fame and eventual fall is a lesson that cannot be overlooked. In an industry in which fortunes can be made overnight, the foundation of security may also crumble. Sometimes the image you put together doesn’t match the picture on the box. Buyer beware never rang truer. Do not put all of your eggs in one basket. Instead, tread carefully and keep an eye out.