the hypotheses on the blockade and the analysis of the financial statements – Corriere.it

A flaw created by a hacker attack in 2021, but also an active presence on a market, such as that of cryptocurrencies, which literally collapsed in 2022 (Bitcoin prices -64% and Ethereum -68%, just to mention the two cryptocurrencies higher capitalization). Two hypotheses that could be at the basis of the interruption of the operations of The Rock Trading (announced with an official press release on February 17th) and which have a single common denominator: the erosion of liquidity. The balance sheet of the cryptocurrency platform speaks for itself, which raises more than one question. Starting from the sources that have contributed to the generation of profit, all attributable tocryptocurrency investment business.

Crypto activity and foreign exchange losses

In 2021, for example, despite revenues from sales and services more than double compared to the previous year (2,409,119 euros against 1,015,867 euros), The Rock Trading (Trt) had a negative operating income of 519,646 euros (-1,140,828 the previous year). Only as a result of financial income and charges, equal to 2,386,496 euros and relating solely to gains and losses on foreign exchange, the company managed to generate a pre-tax profit of 1,866,849 (165217) euros and a net profit of 1,276,677 euros (in 2020 there was a loss of 147,565). Although not specified in the explanatory notes of Trt, the more than 2 million euros of financial income and expenses should refer to unrealized profits in the world of cryptocurrencies, which then generated an allocation to the non-distributable reserve of the same amount, as also stated in the proposed allocation of profits.
Even the parent company, Digital Rock Holding (Drh), presented a profit on exchange rates (592,820 euros) in 2021, and in the explanatory note it explicitly wrote that these were unrealized profits deriving from an investment in cryptocurrencies made by the company during the of the 2020 financial year.

The collapse and the hacker attack

So far so good, also because the crypto world was booming. But in 2022 cryptocurrencies literally collapsed and the investments made by Trt and Drh will certainly have been affected (the effects will be visible from the budget yet to be approved). Added to this is the need for Trt to cover the 904 thousand euro hole generated by a cyber attack suffered in 2021. On 1 September 2021, the company Onedime, which provides IT services to The Rock Trading itself, suffered a cyber attack which caused the subtraction from the Trt omnibus account of 311.06 Eth (Ether, the cryptocurrency of the Ethereum network, ed), which at the exchange rate on the aforementioned date are equal to approximately 904,000 euros – wrote Trt in the 2021 financial statements – On 10 September 2021, the company proceeded to report the aforementioned theft to the Postal and Communications Police Department of the Veneto, Section of Padua. In order to cover the aforementioned shortfall, on 17 December 2021 the directors of the Company resolved to draw on corporate funds and, specifically, on cryptocurrency stocks held by Trt itself to preserve the economic-financial interests of Trt’s customers, so as to avoid possible reputational damage for the company itself. During 2022, the Company took steps to cover this shortfall by drawing on its availability of cryptocurrencies held in stock.

The hypothesis of the block

At this point there could be two hypotheses: Trt planned to cover the hole generated by the September 2021 hacker attack with the proceeds generated by the crypto world, but faced with declining profits in 2022, the company may have decided to temporarily use customers’ liquidity. Liquidity which she was then no longer able to repay; or, again to recover the hole generated by hackers, they directly invested customer assets, which were then lost in the collapse of the markets or even in one of the many defaults of 2022. It should be noted that the 2021 budget shows 7,049,993 euros of receivables due beyond exercise. Of these, writes Trt in the explanatory note, 7,047,593 euros refer to the value of the cryptocurrencies held by the Company deriving from the commissions received from the customers of the platform countervalued at the year-end value. Translated, the revenues made with the commissions received from customers were used to purchase cryptocurrencies, which are not held on an exchange (in this case, in fact, they would have been receivables due within the year). These are just hypotheses, nothing concrete. The investigators will determine what really happened. But according to what transpires from the financial statements, it seems that Trt has taken risks.

The anomaly of accounts

A further anomaly emerges from reading the financial statements. In the explanatory notes to the financial statements, Trt specified, with regard to liquid assets, that the company also has access to two other accounts, one of which at Banca Sella while the other at Clear Junction Limited based in London, in order to hold the availability of non-Italian users/customers of its cryptocurrency exchange platform. In this regard, it should be noted that the balances as at 31 December 2021 were respectively equal to €706,812.81 for the account held at Banca Sella and €5,181.22 plus £16,661.05 for the account held at Clear Junction Limited. Here – Trt wrote – it should be specified that the aforementioned accounts are reserved for the holding of cryptocurrency assets and are owned by non-Italian users/customers and do not belong in any way to The Rock Trading Srl which, in this context, acts only as the holder of the aforementioned account. An activity at the limit, almost comparable to that of a bank. In fact, without this specification in the financial statements, the activity of Trt would be configured as a collection of savings, which can only be done with a banking license. But then, why not put the same specification also for the Italian clientele?

The deposits of Italian customers

On the other hand, there seems to be no trace of the deposits of Italian customers in the financial statements, where there are neither payables to customers nor a specific one in the explanatory notes such as the one reserved for non-Italian customers. Payables, for a total value of 5,633,479 euros, are divided between payables to banks (2,009 euros), suppliers (508,922 euros), taxes (82,769 euros), social security institutions (14,743 euros) and other payables (5,025. 036 euros). The latter are the most significant item, around 90% of the total: the destination is not specified in the notes to the financial statements, but it is not possible to classify them as payables to customers as the Balance Sheet expressly indicates that these are payables due beyond financial year (if they had been payables to customers they would have been due within the financial year). So where did the capital that was used by customers to purchase cryptocurrencies go? From the information collected by Corriere.it, payments from Italian customers flowed into a virtual Banca Sella iban of which The Rock Trading was simply the holder, while the accounts themselves and the respective balances remained the property of the customers, exactly as indicated in the explanatory note for non-customers Italians. And for this reason that there is no trace of them in the balance sheet, as they fall within the system of memorandum accounts which are not entered in the balance sheet.