Bitcoin Forum

On September 27, 2019 the case which allowed a user of CoinOne whose exchange account was hacked to sue the cryptocurrency exchange for the amount of funds which was stolen from them. The hacker exchanged the cryptocurrency in the victims account into bitcoin then allowed them to withdraw it.
https://bitcoinmagazine.com/articles/south-korean-court-sets-compensation-precedent-for-cryptocurrency-exchanges

Isn't it strange this exchange didn't have a limit in place so to safe guard against them withdrawing the entire amount from the account before the original account knew and could of stopped the second withdraw from happening? Atleast the hacker wouldn't have been able to drain the account completely of their funds.

It seems like the people who did this job knew so well that there's a flaw within the exchange platform's system, and capitalized on it in order to do the job swiftly. Or perhaps, the other perspective would be an inside job--what else would it be? Anyhow, I think it's best that the South Korean government really step up their game by passing this ruling in order to not get the customers f***ed  up on their own money. But then again, it's possible that the owner of the account created this whole fiasco and in turn, made money in the end. There's just too many angles to look at really, that finalizing a bill regarding hacks, exchanges and crypto in general is so hard and difficult.

I hope the victim gets justice. Exchanges should do enough to securing customers fund or at best they should have an intervention fund to cushion the effect of a hacked account or the exchange itself. We have had too many case of hacked exchange in South Korea. Although the country is a hardworking honest people.

we are slowly starting to see more cases like this where people are succeeding in legally pursing their losses through legal channels. i think it is a good news firstly because it shows the recognition of cryptocurrencies as something that has value and also it prevents exchanges from doing whatever the hell they wanted. they now know if they scam their users, they wouldn't be able to get away with it as easy as before.

If they are a legal entity holding customers funds, I say it's only fair that they are legally responsible for the funds they're holding on behalf of others.

Kudos to South Korea!

At least South Korea made the exchanges liable to its client's fund, I hope other country will impose this kind of verdict.  It is really their responsibility since they had offer the service and clients trusted them to hold the fund.  It is one of the better move by the government to make the cryptocurrency industry a safer place for traders.



If there is no anomaly on the users pc where the user access his account then it is most possible that it is an inside job.  Remember they have access on everything on the exchange, they can move everything especially when the staff has the administrative privilege on the platform.  We have heard of the same tactics by the exchange but several users never had a the courage to sue them because of the exchange unfair Terms and users agreed with it.

They really ought to, if they cannot be held responsible for such, then they the exchanges can go ahead and frame a user up, sapping up his or her coins and claiming it was hacked. If it wasn't they who scammed the user, let them provide reasons as to why their system makes it easy for scammers to withdraw all the funds in a customers account.

I have a strong feeling the exchange know what went down with that funds, it's either a few exchange operators were working closely with the hackers and gave them the needed information to carry out their operation successfully, if it's discovered they have a hand in it, I think the exchange need to be charged and closed down.

The world has already seen few multi million dollar exit scams within just 10 years of crypto existence!

 I am not surprised by this step of the South Korean government. Unless a certain standard is set, such kind of incidents will keep on happening! Sometimes it is better to have exemplary actions to reduce the frequency of such future events. I think every government that legalized cryptos in the economy, must make insurance cover mandatory for crypto exchanges. That should be a pre requisite for every license application.

The exchanges in South Korea are going to adapt to the new regulations by taking out insurance and the cost of the insurance are going to past onto their customers. So you can expect higher fees from the South Korean exchanges for them to protect their profit margins.

Exchanges has always been the weak link in Crypto currencies and that is why we should get rid of them. People should exchange bitcoins from Fiat to Bitcoin on a person to person basis with escrow protection. Exchanges also sacrifice people's pseudo anonymity with all these KYC/AML requirements.   >:(

It should be a fundamental legal right of every customer that if their funds is lost by an exchange which is basically in custody of it, they should have legal ways to run after the one that is holding their funds. The owner of the funds do not actually own them in that setup because he does not have its private keys. He is entrusting his coins to the company.

It is somehow surprising why this kind of legal remedy to the customers or obligation in the part of the exchange has just came out very lately. This should have been implemented already.

If the exchange broke their own policy then they should indeed cough up. The weird IP thing is a bit different. Some exchanges allow you to specify which IP is permitted. Perhaps they should be clear about that. Plenty of people log in with VPNs et al.

Other than that no way should exchanges be liable for the lax security of their users.

Indeed, this could be a landmark case that will set a precedent to future crypto litigations and I can say that the ruling has been fair and just. The case did got  a merit since there were security lapses on the part of the exchange in which if I understand correctly," its argument states that the exchange had a daily withdrawal limit policy but was not enforced when the attacker successfully acquired more than what was stated on that daily withdrawal limit policy" and in effect, clearly shows that the exchange is indeed liable for that loss!

I think this case will have good consequences and will also be beneficial to the whole crypto community since it could also effectively trigger  exchanges to review their security policies and do audits in order to make the platform more robust and secure which could be beneficial to both its operators and  customers respectively.

I think it's a good thing. If the hack occurred because of a security breach or something else for which the exchange is to blame rather than the customer, the exchange should definitely reimburse the money. And good exchanges do it without being taken to court (like Binance did when there was a huge hack months ago). And if an exchange scams people and the owner of the exchange is known to the public, this owner also should suffer charges and compensate people who lost their money because of it. Unfortunately, it's often not the case. At best the scammer gets a sentence, but people don't get their money back quite often.

And of course we all know that movies and reality are one and the same. Specially in Korea, where the meaning of drama must lie hidden in the name somewhere...

Politic fiction dramas aside, online wallet liability should indeed be a thing. But it is more complex than that, user side security is also a big issue. Not saying online wallet operators often are negligent but a proper investigation is needed.

In reality its usually both, as the whole idea of users using insecure practices and software, trust "online" because they feel incapable of securing funds by themselves. In that case you are using a service so a third party has your money safe, and such service would be breaking their part of the contract if they fail to do so (that is why you were paying them in the first place).

Exchange is but one type of typical online wallet operator (there are a few exchanges where you can use your own wallet instead). This is pretty much a type of bank (full reserve bank) and could perhaps receive the same (or better) type of regulations.

This mess only exists because of the need to exchange fiat to crypto, else people could all just keep things in their own wallet unless they don't want to.

If there are any precedents regarding the legal protection of the rights of cryptocurrency users, fraud can really come to an end.  Perhaps I will move away from the topic a little, but I would like to see real actions regarding the protection of the rights of Bounty Hunters, as well as investors who invest their money in new projects.  First of all, these people need to be protected in courts from unscrupulous developers and really pay their contribution to new projects at their true worth.

Nobody should assume IP whitelisting is in effect on their accounts. In fact, nobody should be employing it at all -- it's a great way to get locked out of your account (https://www.reddit.com/r/bitfinex/comments/7jakcs/cant_access_account_due_to_ip_whitelist_and_i/).

The customer claimed Coinone should have blocked access to his account because the hacker's login didn't match his usual IP address. That's a massive stretch, and I'm glad the court disagreed.

Allowing withdrawals beyond their own stated limits is just silly. Indeed, they should cough up. That's not exactly a surprising conclusion from the courts.

Its their responsibility to ensure that our funds with them are safe and secured so if there’s a lost then its the fault of the exchanges whether its a hacked or not. This is a good for the users of the exchanges, and maybe this can lessen the number of fraud happening around the exchanges now its time for them to increase the security of their platform.

The court made good decisions and landmark decisions and should be a good example if similar incidents happen in exchange even if it is located in other countries, the exchange has the full responsibility and to cover and fix all their security loopholes, it has always been the case and the court should set an example of punishing an exchange that fails to check their security and the Korean court did just that.

That's what is suppose to happen. If the exchange found the fault is in their end, then they should be sued by the court. Coinone is one of the biggest exchange out there. No wonder why they are targeted by hackers. Anyway, it happens. Nothing they can do about that. The hackers already withdraw the funds. Lesson learned for Coinone. I think they're are just complacent about their customers security or even their security. But atleast the users can sue them for the losses. It's their fault by the way. Why users have to suffer for their mistakes?

Here is the thing , we all keep saying that exchanges hold our funds,  withdraw limits, we need freedom, freedom come with a price if you lose your private keys who will be blamed? you, then its the same if you use exchange and you don't set up 2FA. if the exchange by itself hacked, then its the exchange problem.
and as the golden rule says: never keep your funds on an exchange " Not Your Key, Not Your Coins "

It's a step in the correct direction, and in a perfect society, no matter where you keep your funds, whether it's a cold wallet, or on an exchange, the money is always yours and even if the exchange is hacked, you get your money back.

It's likely a layer of security the exchange lacked, and then the hacker knew about it and was able to capitalize on the error.

Agreed mate, too many hacks have taken over place this year and it almost seems like the exchange doesn't lose anything, it's just the victims that get screwed over. Maybe regulation is actually not that bad :P

I think we have seen this before:

https://cointelegraph.com/news/coinbase-uk-settles-lawsuit-with-victim-of-email-phishing-attack

So probably we can see this happening in the future and this could really set a precedent. I mean we has seen exchanges being hack, exploited and there's nothing that traders can't be but lost everything here. So exchanges need to be responsible at least to protect our money and have some kind of protection in chase of a breach. And suing them is the best logical thing to do so that the money can be return to us.

That is somewhat different case compared to the South Korean incident and naturally Coinbase should be responsible to return the ill gotten funds since it was traced into their platform which is very much favorable to the aggrieved  party.

With regards to the South Koren incident, I think the ruling find justification on the plaintiffs argument and indeed they held the exchange liable but not all of these hacking incidents would be attributed to the exchange alone since its always a case to case basis - I  think the end users has also the responsibility to do necessary precautions to safeguard his/her assets.

It's very important for the exchange to have extra layers of securities, it will increase the trust of many investors and traders to use their services. Not unless the team behind are responsible or have knowledge about this incidents, It's damaging in terms of the business capabilities to protect members accounts. Need to have an extra precautions before using sites like this, the victims needs to have extra layers of protections to prevent things to happen again, Hope that they will find justice about to this issue.

Yeah. That case probably set a pretty important precedent the next time a victim of an exchange hack is interesting in suing the exchange, I can imagine a lot of cases being pretty shut and open with that single case being finalized, pretty crazy stuff.

These stories and losses for exchanges will definitely cause some of them at least to take a second look at their security and I hope we see a lot less hacks in the future with stuff like this.

I agree with this 100 percent.

Many country still less respect for cryptocurrency bitcoin and altcoin as digital payment because many scammer want to get profit with bitcoin and altcoin, there are every years have an exchange market make drama with lost their fund by hacker and government in South Korea re think for giving space to bitcoin or altcoin become legal.

This is good though. I am glad to read that he was compensated above what he had lost and not just what he had lost. Most likely a lot of money for that user. I am glad to see things are being put into place to curb scam exchanges and that they are actually seeing results. It is a small win of hopefully many more to come. Thank you for the article. I enjoyed reading it.

It's negligence on the part of the Korean exchange, and because of this they shoulder the responsibility of refunding their users, this is a good judgement now these exchange will upgrade their security to the highest level because I'm pretty sure this judgement will be adopted by other courts.

Finally we see some improvements when it comes down to exchanges, I can't remember the last time I saw an exchange refund or help the victims of an hack, except maybe the Binance hot wallet hack a couple of months ago.

I hope governments around the world start looking at rules when it comes to exchanges more, and actually  punish exchanges that get hacked, so the people don't lose their money, the exchange does.

In my view, the court allowed that cryptocurrency exchange to be sued all because it failed big time in terms of security measures. There should have been a way that can alert the account owner of anything going in with his account like 2FA or requiring a confirmation code which is to be sent either to the email address or the smartphone number or maybe even both -- and then the system should not allow any changes to the email address and the number without another confirmation code send to both devices. Hacking can happen to anyone though but the message is quite clear here: the cryptocurrency exchange has the full responsibility and obligation to their users in making sure that digital assets are secured and not compromise and failure to do so can mean that users can take legal actions if they wanted to.

Hopefully, this can mean that from now on cryptocurrency exchanges operating in South Korea will be doing everything they can to safeguard their whole business - which is actually to work for their best interest in the first place -- and maybe if they can find an insurance carrier for their business it would also be great. Another good option is to establish a fund similar to what Binance did so that in times of emergency things will not spiral into chaos and loss of trust and confidence on the platform.

Most strong exchanges that I have seen been hacked either close down like cryptopia which till date, they have not refund one single cent to their users, or such exchange would just ignore, it is only binance that I have seen make full refund of the funds back to their users after they were hacked of $41 million dollars the last time, and I think that this is the reason why binance will always be the number trusted exchange with their safu fund.

There is no exchange that is actually safe from attack, because these hacker too are well trained to know the weakness of every exchanges which they really cannot do without when it comes to application development, but at least they should always have safu fund like binance, but now that government has given power for them to be sued, I am sure they will always consider safu funds now.

This ruling will be helpful to traders who have nothing to do with exchanges' lost of funds. The problem is from the exchanges' end. Why would traders suffer for the exchanges' mistake? They deserve to be sued by the government. It's very rare to see that an exchange gives a full refund for the loss fund of their customer. Like others were saying, Binance did a good job doing that. That's why their customers are retained. Thanks to Justin Sun who help Binance CEO to pay the victims. Korean traders now have nothing to sorry about losing funds now. Thanks to Korean government rulings about cryptocurrency Exchange.

When exchanges lose their investor and customer funds, they don't take responsibility for it and then turn the blame on the customer for losing funds, so no exchange has the resources or would want to refund their customers, Binance tried to help but simply refunding half isn't enough.

Exchanges nowadays should either make their exchanges unhackable which is pretty hard, or hide some of their own funds in a cold storage (like an emergency fund) and then when they get hacked, they are able to repay using that.

Very helpful indeed to traders. Traders go to exchanges whom they can trust their crypto assets,if it lost on exchanges platform, then they should be responsible for it. They should step up their exchange security,it adds to their reputation. Traders should be protected here, and this ruling is significant and a welcome update to us.

South Koreas Cryptocurrency exchange COINONE was found out by the Korean court to be partly-responsible to the lost funds due to the hacking incidence. Now the court  have ordered the exchange to pay some damages to their clients. This is just normal since COINONE have mislook the security feature on their system and thus the hacker have withdrawn a huge amount of cryptocurrency in one transaction. This may serve as an example to other exchanges to protect their clients funds with much more tighter security features.

I think any exchange which handles people's money can and should be sued however the thing here is tracing out transactions all over the globe. I mean it's possible to sue exchanges if they are registered in your country but How will you sue foreign exchanges located in a distant country. Moreover suing such big exchanges is just like suing some very big companies with unlimited resources. Even though this ruling atleast bring some regulation on exchanges as they can't do anything just because they want to. Most happy would be traders who are generally harassed when they hold large sums of money on exchanges.

I think there is still many news about hacking incident from exchanges.
From now the developer must prepare first for security fund. Because that is crucial problem. Hacker can easy take fund if they can know the hole in security system, if the fund empty, so hard to exchanges get trust.
Atleast they have enough backup fund to cover loss like that.

That should always be the case, if they cannot insured the funds of their traders or clients they have to pay them when there is a hacking incident, I hope all courts in the world have this kind of ruling, so many exchanges took months or even years to refund their traders after the hacking, all of these should be shouldered by exchange and it's a big warning for exchanges to always upgrade and update their security.

This is why the government wants to prohibit usage of crypto. It's because of these news thay portray bad image to cryptocurrencies, and also the reason why we should have regulatory boards to oversee crypto-related projects, such as these exchanges, various ICOs, and other services.

If the exchange won't take action and pay the victim his loss, then it should be punishable by law. The problem is that no concrete laws are passed and to implement invloving the current crypto-space.