According to a report by the Korean Economic Daily, Bithumb, one of the largest digital asset platforms in South Korea, has been acquitted of charges filed against it by one of its clients.
On November 30, 2017, Bithumb was sued by an investor, Ahn Park, who claimed the company’s subpar security measures were responsible for a hack that was carried out on his cryptocurrency account, which resulted in a loss of 400 million Korean won (approximately $355,000).
Park claimed that he found out about the hack a few hours after it had begun—enough time for the intruder to purchase Ethereum (ETH) with his deposits and make four separate ETH transactions from his wallet into a separate wallet address controlled by the thief. At the end of the hack, Park’s cash deposits were gone, leaving just 121 won (the equivalent of 11 cents) worth of ETH left.
Park argued that the company had failed to implement the kind of security measures that were befitting the status of a “financial service provider,” while also referencing an incident in July 2017 where hackers were able to gain access to the personal information of over 30,000 Bithumb users. As part of his argument, Park claimed that the security measures of the exchange have proven to be defective, and the company still hadn’t implement checks to help fix the loopholes in its security.
In addition to demanding compensation for Park’s losses, the lawsuit also asked questions about cryptocurrency exchanges, their obligations to their customers and the extent to which they can be held liable for security breaches.
Bithumb denied all liabilities in the case, claiming that apart from not being a financial service provider or electronic financier, it had sent Park SMS alerts to notify him of the transactions that were being made with the use of his account. Park stated that he never got any SMS notification.
The judge eventually ruled against Park, arguing that the company had fulfilled its obligation to him as a client, even though Park claimed he didn’t receive any of the SMS notifications, purportedly sent by the exchange.
Bithumb was the victim of a major hack earlier this year, losing $30 million in cryptocurrency holdings. The company subsequently announced that it was halting all deposits and withdrawals for a while and that it was working on compensating all users who were affected by the hack.
“We checked that some of cryptocurrencies valued about $30 million were stolen. Those stolen cryptocurrencies will be covered from Bithumb and all of assets are being transferred to cold wallets.”
In addition to that, all customer funds were temporarily moved to cold storage, noting via Twitter:
“[Notice for the restart of service] We are transferring all of asset to the cold wallet to build up the security system and upgrade DB. Starting from 15:00 pm(KST), we will restart our services and notice again as soon as possible. Appreciate for your support.”
In October, cryptocurrency swap platform Changelly announced that it was able to help Bithumb recover a million XRP from the theft. Changelly’s CEO Ilya Bere stated that the company implemented Ant-Money Laundering procedures on the Bithumb platform and targeted malicious addresses that were recognized by the platform, while also preventing the company’s Application program Interface from executing any transactions.