Bithumb Wins Lawsuit Against Investor Claiming to Have Lost $355,000 Due to Hacked Account

  • Korean exchange Bithumb wins lawsuit against investor claiming to have lost funds from his account due to Bithumb's negligence. 
  • Claimant had alleged that $355,000 worth of ether was stolen from his Bithumb account due to poor security measures. 

Cryptoasset exchange Bithumb recently won a lawsuit settlement against a digital currency investor who had sued the South Korean company for his losses of about $355,000 due to an alleged hack of his Bithumb account.

$355,000 In Cryptocurrency Allegedly Stolen From Hacked Account

According to the Korea Economic Daily, the 30-year-old investor who had filed a lawsuit against Bithumb is a civil servant named Ahn Park. The outcom of the case, which was announced on December 24th, was that the alleged loss of 400 million Korean won (appr. $355,000) from Park’s account on November 30th, 2017 was not due to any reasons for which Bithumb may be held responsible.

In court documents, Park had claimed that within a few hours of him making a large deposit on the South Korean exchange, a hacker had managed to gain access to his Bithumb account. After obtaining access to the account, the unidentified hacker had allegedly exchanged the fiat currency held in Park’s account for ether (ETH).

As described by Park in court papers, the unnamed hacker conducted four separate outgoing transactions from the victim’s Bithumb wallet to other crypto address(es). After the transactions, Park’s account balance was reportedly reduced to only 121 won (11 cents) in ether. As mentioned, Park had argued that Bithumb’s management team failed to provide adequate security measures to protect his account from malicious hackers. Park further alleged that Bithumb’s support team did not fulfill its obligations as a “financial services” firm.

10 SMS Messages Reportedly Sent To Park Regarding Outgoing Transfers

Moreover, the claimant alleged that cybercriminals might have obtained his private passwords and other personal information during a hack that occurred in October 2017. The damaging security breach had reportedly resulted in hackers gaining access to financial data that belonged to over 30,000 Bithumb customers.

According to Yonhap News, there were at least 10 SMS alerts that were sent to Park’s cellphone, in order to inform him of the outgoing transactions from his Bithumb account.

However, the claimant stated that he never received any of the SMS messages and that “it was difficult to rule out the possibility of being hacked.” Park also claimed that Bithumb’s operations as a cryptocurrency trading platform are similar to the types of services provided by firms in the traditional financial services industry. Therefore, Bithumb must follow the same security guidelines that apply to e-commerce businesses.

Judge Rules Against Park's Arguments

Notably, the judge ruled against Park’s arguments, noting that: 

In general, [digital] currencies cannot be used to buy goods and it is difficult to guarantee their exchange for cash because their value is very volatile. [Digital currencies] are mainly used for speculative means, [so it] is not reasonable to apply [South Korea’s] Electronic Financial Transactions Act to a defendant who brokers [digital] currency transactions without the permission of [Korea’s financial regulator,] the Financial Services Commission (FSA).

As CryptoGlobe reported, Bithumb was hacked in June 2018, and approximately $30 million in cryptocurrencies was reportedly stolen due to the security breach. However, Bithumb was able to resume operations again as several crypto industry participants helped the exchange recover around $17 million worth of stolen funds.

In October, Hong Kong-operated digital asset exchange Changelly announced that it managed to help Bithumb recover over 1 billion XRP that had been stolen due to the hack.

U.S. Congressman McHenry Calls Bitcoin ‘An Unstoppable Force’ at Libra Hearing

As far as cryptocurrency fans are concerned, one U.S. Congressman, Patrick McHenry, was the star of the House Financial Services Committee hearing on Libra on Wednesday (July 17). 

Before we talk about what happened at this hearing, and more specifically, how Congressman McHenry managed to endear himself to all blockchain and cryptocurrency fans, it might be helpful to present a very brief biography of him here.

Patrick Timothy McHenry is the U.S. Representative for North Carolina's 10th congressional district. He is serving his eight term at the U.S. congress, where he is currently the Republican Leader of the House Financial Services Committee, "a committee he has served on since he was elected to Congress" (in 2004, when he was just 29 years old).

On Wednesday (July 17), a day after Facebook's David Marcus, who is a co-creator of Libra and the head of the Calibra project, faced tough questions at the U.S. Senate Committee on Banking, Housing, and Urban Affairs (aka "Senate Banking Committee"), came the real grilling at a full hearing (titled "Examining Facebook’s Proposed Cryptocurrency and Its Impact on Consumers, Investors, and the American Financial System") of the U.S. House Committee on Financial Services.

Committee Chairwoman Maxine Waters (D-CA), who had previously implored Facebook to stop working on the Libra project until Congress could understand better the implications of what Facebook's proposed cryptocurrency, started the hearing by delivering a prepared statement, during which she, once again, expressed her "serious concerns with Facebook’s plans":

This venture is slated to be based in Switzerland, which has a history as a monetary haven for criminals and shady corporations. Facebook’s plans raise serious privacy, trading, national security, and monetary policy concerns, not only for Facebook’s over 2 billion users, who will have immediate access to these products, but also for consumers, investors and the global economy.

 Congressman McHenry's gave his opening remarks around 11:00 (Eastern Time). Here were the main highlights:

  • "Washington must go beyond the hype and ensure that it's not the place where innovation goes to die."
  • "Just because we may not fully understand a new technology proposal does not mean we should immediately call for its prohibition, especially when that proposal is just that — a proposal."
  • "The reality is whether Facebook is involved or not, change is here. Digital currencies exist. Blockchain technology is real. And Facebook's entry in this world is just confirmation, albeit at scale."
  •  "The world that Satoshi Nakamoto, author of the Bitcoin whitepaper, envisioned—and others are building—is an unstoppable force."
  • "We should not attempt to deter this innovation, and governments cannot stop this innovation. And those that have tried have already failed."
  • "Instead of a knee jerk reaction of banning something before it begins, my Replication colleagues and I want to first try an understanding. An in turn, based off what we learn, determine whether or not our current regulatory framework meets the demands of this new technology."  

Then, around 15:30 (ET), McHenry began his questioning of David Marcus about Libra; some of his most interesting questions are listed below.

McHenry: Is it a security?

Marcus: We don't believe it is, Congressman.

McHenry: Is it a commodity?

Marcus: Congressman, based on current U.S. law, it might be a commodity, but we see it as a payment tool.

McHenry: Is it an exchange traded fund?

Marcus: It is not, Congressman.

Congressman McHenry repeated his claim about Bitcoin being an unstoppable force during an interview with Andrew Ross Sorkin on CNBC's morning news and talk program "Squawk Box":

I think there is no capacity to kill Bitcoin. Even the Chinese with their firewall and their extreme intervention in their society could not kill Bitcoin.

Sorkin then told McHenry that although it might not be possible to technically "kill" Bitcoin, it was possible for governments to create legislation that made access to Bitcoin illegal for their citizens at fiat on/off ramps such as exchanges (e.g. Coinbase) and custodial wallets (e.g. Calibra), and that would "effectively make it very very difficult for the mainstream to use it." Sorkin then said that's why investors in Bitcoin were worried, which explained the recent drop in price.

McHenry replied:

Yes, so the price has come down to roughly $10,000... But you are talking about something that... people were giving away for free. It's now trading at $10,000... But the essence of Bitcoin is what Libra, Facebook, and corporates are trying to mimic.