Victim of crypto exchange hacking scores victory against exchange

The Seoul Southern District Court ruled that Coinone, a local cryptocurrency exchange, should partially compensate a hacking victim. The plaintiff was awarded about 25 million won ($20,850). What happened? The cryptocurrency investor had 47.95 million won and nine cryptocurrencies, including 2,718 EOS tokens, stored in their account in the Coinone exchange as of Nov. 22, 2018. On Dec. 23, all their cryptocurrency was sold and bitcoin tokens were purchased. A total of 11.95 bitcoin tokens, worth around 58 million won, were transferred to another account in two stages, leaving only 5,982 won in the investor’s Coinone account. The account activity was problematic, as the trades were traced back to an internet protocol (IP) address in the Netherlands. Victim requests compensation from Coinone The plaintiff said that Coinone violated information communication laws by failing to block access from an overseas IP address that wasn’t used regularly. The plaintiff also argued that Coinone should have blocked the transaction considering the daily transferring limit of 20 million won, and requested Coinone compensate them for losses of 58 million won. Coinone argues that it’s not at fault Coinone responded that it was not responsible for leaks of personal information that led to the alleged hacking and that it is not required to block overseas IP access. It also said that the daily transfer limits were based on government policy, not its own, so that transfer over the limit was not a violation of its duties. The Court partially sides with plaintiff The Seoul Southern District Court sided with the exchange over personal information leak and the overseas IP address issue. It explained that the exchange did not have a duty to block overseas IPs, considering the nature of cryptocurrency transactions, which allow individuals to make anonymous transactions. However, it ruled that the exchange was at fault for not properly implementing the daily transfer limits. It explained that although the government’s transfer limit measures were introduced to prevent money laundering, the exchange was responsible for carrying them out, as it had notified its users that it would. The court said that the limits were not only a government administrative regulation but also part of broader policy to prevent financial accidents at exchanges. First victory for cryptocurrency exchange victim “This is realistically the first case in Korea in which a claim for damages by a user against a cryptocurrency exchange was upheld,” said Jeong Jae-wok, an attorney at Joowon law firm, who represented the plaintiff. “It clarifies the legal responsibilities of cryptocurrency exchanges to have more protection measures in crytocurrency transactions compared to ordinary financial ones.”

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