50,000 victims of the Japanese crypto exchange Bitpoint's recent hack will have their stolen wallet holdings reimbursed in crypto. This was revealed in a press conference in Tokyo, where reporters were informed that the company had decided to pay back victims in crypto using a 1:1 ratio, as against fiat payouts.
Bitpoint's Unusual Alternative to Fiat Payouts
This, is in contrast to the regular practice of sending refunds to hack victims using fiat payouts, such as in the case of Coincheck, which last year refunded more than $440 million in fiat to customers. Japan has recently been plagued with a series of huge, coordinated exchange hacks, with 260,000 people losing their funds in January 2018 alone.
The exchange had on July 12 announced that it lost 28 million dollars ($20 million in stolen crypto belonged to customers rest from the exchange) to hackers and proceeded to suspend all activities on its platform including trading and withdrawals.
Hackers Thieve $32 Million in Cryptocurrency from Japanese Exchange Bitpoint https://t.co/5xM14YD3ud
— CCN Markets (@CCNMarkets) July 12, 2019
The exchange in a report admitted that the hackers accessed one of its hot wallets and made away with 1225 BTC, 1985 BCH, 11169 ETH, 5108 LTC and 28,106,343 XRP.
Crypto Exchange Bitpoint Admits to 50,000 Victims of $32 Million Hack https://t.co/KQUIKYRMBK
— CCN Markets (@CCNMarkets) July 16, 2019
Speaking at the press conference, BITPoint CEO Genki Oda apologized for the hack, stating that the exchange is investigating how it happened with a view to overhauling its security systems. He also promised that all affected customers will be reimbursed as soon as the now-suspended platform resumes operations once again.
Users will receive the same amount of cryptocurrency which they lost to the hack, but the exchange refrained from answering questions about whether customers will end up losing due to the chosen refund method. Bitpoint declined to comment on this issue, stating that it is a legal matter.
Best Practise or Shortchanging Customers?
The matter of whether users of a hacked exchange should be reimbursed with fiat payouts or in crypto is a long-running discussion in Japanese crypto circles because of the regularity and size of swings that affect this asset class. The 2014 Mt. Gox hack threw up a similar case, with creditors fighting to be reimbursed with the exact amount of bitcoin they had in their wallets at the time of hacking.
The ongoing legal fight began when creditors were informed that they would receive fiat payouts equivalent of what their bitcoin holdings were worth in 2014, which represents a huge loss of earnings if compared to what those holdings are now worth.
Got this in the mail from Japan. Man so glad I got my #bitcoin out of MtGox early. There are a lot of people who got this who lost 1000s of BTC's. I look at this a start reminder you don't own your coins if you don't control the address. #hodl pic.twitter.com/AxiBrNknM9
— Stevie F. (@thestringpuller) July 17, 2019
Bitpoint plans to reimburse its customers with the exact crypto holdings they had on the day of the hack which means that regardless of any price fluctuations since then, affected users will receive exactly what they lost to the hack. At the moment, there has been no great variation in crypto valuations, but the longer the payout process takes, the greater the possibility that this could change.
On the surface, it would appear that the exchange is making all the right noises, which is a good sign. Conversely, it has refused to comment on how it plans to protect customers from price variations, neither has it committed to a firm timeline for payouts or resumption of operations. As with so many other incidents in the crypto space, it appears only time will tell what becomes of Bitpoint's customers.