As the crypto space matures, cryptocurrency exchanges are being held more accountable for their actions – or lack thereof.
Bithumb, the world’s #1 crypto exchange by volume, is now finding this reality out the hard way.
After Bithumb’s servers crashed for 90 minutes during the astounding November 12 Bitcoin Cash price rally, the exchange’s South Korean traders lost millions’ worth of won and dollars.
These traders are calling for a reckoning, and the authorities have gotten involved accordingly.
Let’s bring you up to speed.
Inside the crash
Can Bithumb weather this current crisis? – Image via PR Newswire
What makes this November 12 server crash so unfortunate for users is that Bithumb faced an almost identical situation back in June 2017 when the exchange’s servers crashed during an acute Ripple (XRP) run.
So, even though months have passed since June, Bithumb’s team still hasn’t apparently fixed the backend problems in question.
Thus this weekend when Bitcoin Cash was making its titanic surge up past $2,400, many Bithumb users were rocked as the exchange crashed. Investors were horrified as they were unable to execute trades that would’ve made, or saved them, millions of won.
Once the exchange went live after 90 minutes, investors came back to their dashboards to see wrecked positions and easy money left on the table.
That’s when the real rage began.
As one of the affected investors told The Korea Times:
People are thinking of whether to die overnight, but the employees [of Bithumb] don’t even come out of their offices.
Investors sue Bithumb for negligence
As the dust settled after the server outage, a legal battle was just beginning.
3,000 of the affected investors immediately filed a lawsuit against Bithumb, alleging South Korea’s most popular Bitcoin exchange has refused to take to resolve its backend problems in a timely and professional manner.
At this point, it’s anyone’s guess whether the case’s judge will sympathize with the investors or if the case will even make it to trial.
For their part, Bithumb’s trying to hit all the right PR notes, with the exchange releasing an announcement to the stakeholders involved that investors would be made whole again:
“We are discussing measures to compensate the investors. We will meet our legal and social responsibilities concerning this issue.”
Even still, the situation outside of Bithumb’s Seoul headquarters is understandably tense. So tense, in fact, that local police have been posted around the headquarters’ perimeter to ensure that enraged investors can’t attack the exchange’s employees.
Do the investors have a case?
If the problems with Bithumb’s servers are found to be sourced from Bithumb’s server provider itself, then the exchange will likely be absolved of any culpability in the Nov. 12 outage.
It’s possible, of course, these affected investors are just angling for a settlement out of court.
There is scant legal precedent globally – much less in South Korea alone – for these types of hyper-niche lawsuits.
Also relevant is the fact that recent reports indicate North Korean government hackers have been probing and sabotaging South Korean crypto exchange operations in recent months. If the judge in Bithumb’s case determines the outage was from a North Korean hack, Bithumb will be legally off the hook for their traders’ losses.
Featured Image via Fotolia