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.

OneCoin Denies Being a ‘Hybrid Ponzi-Pyramid Scheme’

The controversial OneCoin organization has recently responded to the Central Bank of Samoa, claiming it isn’t a “hybrid ponzi-pyramid scheme” as it doesn’t fir the definition of these schemes, and that it is a centralized, closed cryptocurrency.

According to the Samoa Observer, the Central Bank of Samoa claimed OneCoin is a “hybrid ponzi-pyramid scheme” that “laundered money through New Zealand to Samoa.” It also claimed the organization was targeting local residents through churches.

The organization, widely believed to be running a pyramid scheme using the cryptocurrency space, sent a statement to the Observer defending itself, claiming it’s neither a pyramid nor a Ponzi scheme. It’s worth noting individuals associated with OneCoin have been arrested and charged in various countries, including China and India.

In its response, OneCoin argued that Ponzi schemes see the revenue of old investors be “generated through the investment of new investors,” and that it doesn’t require its agents, known as Independent Marketing Associates (IMAs), to recruit others in order to earn bonuses.

Its defense revolves around IMAs not being “obliged to incur any additional expenses or recruit a new IMA,” and that they are rewarded for the “value of [their] sales,” not for recruiting new agents.

The organization added pyramid scheme regulations are these for “consumer protection,” and that its IMAs aren’t consumers. This, as when they join the organization they sign a contract classifying them as “self-employed business owners.”

The users which are part of the OneLife Network are NOT consumers. They are IMAs, meaning they are self-employed business owners.

As CoinDesk notes, OneCoin argues it isn’t a pyramid scheme because its agents aren’t seen as consumers and, as such, it can’t be classified under a dictionary definition of a pyramid scheme, and doesn’t force its IMAs to recruit new agents, although they’re incentivized to do so.

OneCoin, instead, argue it is a “centralized, closed cryptocurrency” with strict anti-money laundering (AML) and know-your-customer (KYC) rules, which make it “much more compliant than decentralized [cryptocurrencies].”

As reported, OneCoin’s leaders Ruja Ignatova and Konstantin Ignatov were recently indicted by the U.S. Attorney for the Southern District of New York (SDNY) on charges of wire fraud, securities fraud, and money laundering. Konstantin was arrested in March of this year.

Moreover, earlier this month former OneCoin investor Christine Grablis filed a lawsuit against the organization’s promoters, with Grablis’ attorney claiming OneCoin’s founders created a multi-billion dollar ‘cryptocurrency’ company based completely on lies and deceit.”