Knaken's $2.5M Crypto Sale Leaves 6,300 Customers With Pennies

Dutch prosecutors have sold the seized cryptocurrencies from Knaken, a Rotterdam-based platform declared bankrupt on July 16 by a Rotterdam court, raising $2.5 million (€2.2 million) for distribution among creditors.

The court-appointed trustee, Carl Hamm, said customer deposits on the platform ran to somewhere between $12 million and $14 million. The crypto sale proceeds represent the only asset in the bankruptcy estate. Hamm wrote to roughly 6,300 customers asking them to temper their recovery expectations.

The shortfall has a structural explanation that will look familiar to anyone who has followed crypto exchange collapses. For every €100 worth of Bitcoin that a customer bought, Knaken charged €1 in commission and purchased a €99 position on a separate exchange in its own name. What customers saw in their accounts was a cryptocurrency balance. What they actually held in law, Hamm said, was a euro-denominated claim against a company that operated without a regulatory license and that, according to Hamm, had mixed client funds with its own operating expenses for years.

That structure means Knaken customers are unsecured creditors in a bankruptcy with a recovery rate of roughly 17% to 21% of their deposits, assuming the $2.5 million sale price is the final distribution pool. The actual recovery could shrink further if legal costs or creditor challenges eat into the estate.

A lawyer representing one affected client has publicly questioned whether prosecutors had the authority to sell the crypto assets. The lawyer compared the sale to a garage bankruptcy liquidating its customers' cars. Prosecutors said they acted under a provision that permits the sale of seized assets susceptible to losing value. They did not elaborate on which provision applied or whether a court pre-approved the sale.