South Korea: Dangerous Precedent Set – Court Finds Bithumb Not Financially Responsible for Crypto Exchange Hack
Originally published on: CCN
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December 27, 2018
A South Korean court has acquitted Bithumb from all wrongdoings after the company was accused by one of its clients in a hacking incident that saw the customer lose thousands of dollars, according to a report filed earlier this week, in the Korea Economic Daily.
The customer who brought the lawsuit against the exchange was 30-year-old Ahn Park, who alleged his Bithumb account was hacked on November 30, 2017. The customer had claimed Bithumb had allegedly giving hackers the ability to steal his funds, totaling about 400 million Korean won (the equivalent of $355,000).
Park claimed that a lack of proper security measures on the Bithumb platform was the reason why the unidentified hacker was able to gain access to his cryptocurrency account and drain it of all the funds in it- save for a few cents.
The hacker was able to gain access to Park’s crypto account for just a few hours, but that amount of time was enough to use of all Park’s cash holdings to purchase Ethereum and then transfer the tokens to separate wallets, owned by the intruder. At the end of the hack, Park’s account was left with Ethereum worth just 121 won (11 cents).
A point of interest is the fact that the security of the exchange was compromised before Park’s incident. In an earlier incident back in July 2017, hackers had gained access to Bithumb’s employee records as well as the private information of about 30,000 users. Since the security of the exchange had been compromised before,
Park argued that there were some underlying issues with the servers that hadn’t been fixed, and these made it easy for the hackers to gain access to his funds.
Comparing the Korean exchange’s services to that of a financial service, Park insisted Bithumb should be subject to the similar security requirements that apply to such firms.
However, Bithumb argued that it wasn’t liable for any compensations as it isn’t an electronic financier, a financial company or an electronic financial assistant. Eventually, the court sided with the exchange and cleared it of any charges relating to the theft, agreeing with its argument that it is indeed not a financial company.
The judge also ruled that Bithumb had carried out its fiduciary duty by sending him 10 SMS messages notifying him of the transactions that had taken place on his account. He also said that since cryptocurrency is “majorly used as a speculative means, it can’t be regarded as an electronic means of payment.”
This ruling sets a dangerous precedent for the foreseeable future, signaling trouble for potential cryptocurrency investors who have concerns over losing their assets and having no legal resort.
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