Dutch crypto exchange Knaken faces €7m client shortfall

The Rotterdam District Court placed Knaken Cryptohandel B.V. and Stichting Knaken Payments into court-controlled bankruptcy on July 16. Trustee C.F.W.A. Hamm was appointed to wind down both entities after prosecutors told the court that about €7 million was missing and customers could not access their accounts.

The court found that payments had stopped, customers could not be repaid in full and a significant coverage deficit had not been disclosed. Knaken proposed an independent verification process followed by its own distribution plan, but the court rejected that route and put an outside trustee in charge to manage the collective interests of creditors.

Investigators from the Fiscal Intelligence and Investigation Service carried out searches on June 29, seizing digital data carriers and company assets. No arrests had been announced as of June 30. The criminal probe is separate from the civil bankruptcy proceeding; seizures do not constitute a finding of guilt. How seized items will be treated in the bankruptcy estates must be coordinated between the trustee and criminal authorities.

Under Dutch practice the trustee will inventory assets and claims, examine records for irregularities, protect and liquidate estate property, and propose distributions according to claim priority set by law. For Knaken that work includes reconciling the exchange ledger with wallets, access controls and bank accounts, determining which entity owes each customer, and establishing whether assets described as customer property were actually held outside the company’s estate.

The bankruptcy of Stichting Knaken Payments focuses recovery on the platform’s custody arrangements. Dutch law does not impose automatic statutory segregation for crypto holdings similar to securities rules, so providers commonly use a separate foundation to create legal separation between client assets and the operator. That structure protects customers only if client crypto and funds were actually held, accurately recorded, kept in separate client wallets, and controlled with appropriate key-management and return procedures.

Prosecutors reported Knaken had not obtained the required AFM authorization. The Markets in Crypto-Assets Regulation requires authorized custody providers to maintain per-client position records and to keep client holdings legally and operationally separate so custodied crypto can be traced in insolvency. De Nederlandsche Bank has said crypto assets fall outside the country’s investor compensation and deposit-guarantee schemes.

The trustee must first produce a reconciled inventory of crypto, cash and other recoverable property that can be controlled or recovered. Only after matching account entries to identifiable assets and accepting claims under Dutch insolvency rules can the trustee propose distributions and estimate what customers may receive and when. Court control replaces Knaken’s proposed payout process with supervised accounting and a collective claims procedure aimed at linking displayed account balances to property that can actually be traced and returned.