Coinbin, the South Korean Cryptocurrency exchange which took over hacked exchange Youbit, is filing for bankruptcy with losses equating to over $26 million.
Cryptocurrency and Cash Transactions Stopped
According to reports by Business Korea, the bankruptcy announcement was made by Coinbin CEO Park Chan-kyu on February 20, 2018. After which cryptocurrency and cash settlements were stopped and will now be performed as part of bankruptcy procedures.
Park revealed the Coinbin employee in charge of cryptocurrency balances at the exchange, also the previous CEO of Youbit, had neglected his responsibilities and embezzled Coinbin funds. Park said:
We are preparing to file for bankruptcy due to a rise in debt following an employee’s embezzlement.
Said employee, according to Park, intentionally appropriated the key to an Ethereum wallet containing over 100 Ethereum. The employee had claimed the cryptographic key had been lost.
— Simon Choi (@issuemakerslab) February 20, 2019
Losses of 30 Billion Won Follow Previous Controversy
The bankruptcy will mean losses of 29.3 billion won, the equivalent of $26 million USD. 27 billion won, according to reports, will compensate former members of Youbit and 2.3 billion won in lost cryptocurrency.
Youbit was hacked in December 2017 with a fifth of its user’s cryptocurrency holdings lost to attackers. It had also been the victim of hackers in April 2017, losing the equivalent of $35 million USD and around 4,000 Bitcoin. Youbit filed for bankruptcy after the December attack, but controversially re-emerged as Coinbin a few months later. Just 20 days before filing for bankruptcy, Youbit obtained an insurance policy, leading to claims of insurance fraud.
17% of Bitcoin Reserves Stolen: Korean Exchange Youbit Declares Bankruptcy after Hack https://t.co/uhz4HhtM4W
— CCN Markets (@CCNMarkets) December 19, 2017
Yonhap news reported at the time:
Youbit obtained the insurance on Dec. 1 last year and stopped transactions of coins and won in the same month [on Dec. 19], saying that they saw the hacking damage.
Youbit’s Insurance Claims Were Denied
Youbit’s parent company, Yapian Corp had taken out the policy from DB Insurance, a major South Korean firm. DB Insurance denied the claim by Youbit stating that the exchange had failed to disclose information to its underwriters. Yapian Corp accused the insurance company of using the hack as an excuse not to cover the losses.
North Korea has been busy! #BitCoin hacking by Unit 180 reaped rewards? Wonder if this is why South Korean coin exchange #Youbit plans to declare bankruptcy after a hack resulted in about a 17% decline in assets? pic.twitter.com/AwjZNeC4BK
— Eric L. Robinson (@blacktokyo) December 20, 2017
There were reports that North Korea could be behind the Youbit hacks. The Youbit bankruptcy was the first for a cryptocurrency exchange in South Korea. At the time, and according to the Youbit bankruptcy announcement, customer’s assets were reduced to 75% of the market value. With Youbit promising the remaining funds on the conclusion of the bankruptcy proceedings.
Yonhap news revealed that rights, information, and assets from Youbit were transferred to Coinbin on March 21, 2018. This amidst ongoing civil lawsuits.
With Bitcoin price just appearing to recover after a long crypto-winter, the last thing the sector needs is more failed exchanges and controversy. However, failures, hacks, and scandals look set to continue in the mostly unregulated space.
Headlining currently is still Canada’s QuadrigaCX’s $150 million losses as its founder dies without leaving access to the exchange’s cryptocurrency cold storage.