Bankruptcy of Bitcoin Exchange
A South Korean cryptocurrency exchange said on December 20 it is shutting down and is filing for bankruptcy after losing 17% of its assets in a hack attack. This is the first time for the bitcoin exchange to go through a bankruptcy process due to hacking in the nation.
Youbit said on its website on December 19, “The exchange had been hacked at 4:35 am local time on Tuesday, causing a loss in a coin withdrawal wallet.” The loss is worth about 17 percent of its total assets and there were no additional losses as the other coins were kept in a cold wallet, which is an external storage device that isn't accessible to the Internet. It also said, “The management has decided to stop all trading, prohibit from making a deposit and withdrawal and file for a bankruptcy as of December 19.”
Youbit announced that it will not allow to make a deposit and withdrawal of all coins and cash as of 2 pm on the same day and return coins and cash according to all the bankruptcy procedure. It said that customers would get back about 75 percent of the value of the cryptocurrency they have lodged with the exchange as of 4 am on the day to minimize customer losses. The remaining accounts payable will be paid back to customers after all the procedures are completed.
Youbit added, “Customer losses are expected to be lower than 17 percent through various ways such as the company’s cyber total insurance worth 3 billion won (US$2.76 million) and the sale of the company’s operating rights. There will be resistance from investors as the company announced that digital currency investors should bear the loss of the bankruptcy caused by the cyber-attack, though the size of losses can vary depending on the result of liquidation.
YouBit, formerly known as Yapizon, had been hit by a hack attack in April, when hackers stole 3,831 bitcoins worth 5.5 billion won (US$5.07 million). At that time, the exchange announced that investors need to bear the loss of 37 percent, causing controversy.
More and more cybercriminals have tried to cash in on the boom in virtual currencies and are threatening the incomplete security system. In addition to Yapizon, another cryptocurrency exchange called Coinis was also hacked in September and hackers stole the personal information of about 36,000 customers of Bithumb, the largest cryptocurrency exchange in the country, in June. The National Intelligence Service (NIS) recently concluded that these hack attacks were done by North Korea. On November 12, Bithumb went down with server connection failure when the price of bitcoin repeatedly showed a sudden rise, though it was not a hack attack. Accordingly, investors who suffered a loss due to the server connection failure are preparing to take legal action against Bithumb.