South Korea precedent ruling allows cryptoexchanges to be sued due to lost funds

[UNOE]

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.

[dothebeats]

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.

[omone1]

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.

[Herbert2020]

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.

[lightningmelo]

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!

[lionheart78]

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.

the other perspective would be an inside job--what else would it be?

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.

[Coyster]

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.

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.

[avikz]

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.

[Kakmakr]

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.  

[NathanJB]

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.

[gentlemand]

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.

[lobat999]

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.

[kryptqnick]

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.

[Artemis3]

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 might be an inside job, let's see if filing the lawsuit will result in anything. I don't want to give the victims some bad news but base on the Korean movie that I saw (Master), they have a problem with their authorities. politicians, prosecutors and most of the high ranking officials, are connected to this kind of scam. they receive some payment from the suspect. they have done it clean so that no one can expect them to be controlled by the suspect.

This is the case with the movie, when something like this is happening right now the case is not far from reality, right?
So how will they get back their funds? when everything is already planned including the lawsuit.

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.

[Spaffin]

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.

[squatter]

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.

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.

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.

[samcrypto]

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.

[robelneo]

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.

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.

[deadsilent]

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?

[Woshib]

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 "