Bitfinex customers who got socked for a 36 percent loss on account of the recent hack could have legal recourse against the Hong Kong exchange, according to lawyers from Kobre & Kim, a global law firm, CNBC reported.
The Hong Kong exchange, due to the attack’s indiscriminate nature, opted to charge all customers 36 percent, CCN.com reported. Bitfinex also allocated customers a new token on the “Omni protocol” transferable and remaining outstanding until exchanged for shares in Bitfinex’s parent company or repaid by Bitfinex.
Kobre & Kim lawyers Randall Arthur and Jef Klazen noted that customers can file a type of misappropriation claim for having their funds reduced. Other claims could be available on account of negligence or other tort claims related to the way Bitfinex handled the accounts, including lack of adequate security and breach of contract.
Ether Investor Irked
Joseph Schweitzer, a Bitfinex investor, said he had not invested in bitcoin but in Ether, a token that was not compromised by the hack. He said it is likely criminal that Bitfinex is penalizing digital asset wallets that were not affected by the hack and has no user approval for selling 36 percent of those funds.
Bitfinex froze all trading to settle accounts and determine how to spread the losses at the time of the attack.
Making matters worse, Ether traded at an 8-month low when Bitfinex froze trading.
The most the exchange would repay would be the USD value of the assets at their 8-month low, a value that has rebounded by more than 10 percent, Schweitzer said.
Will the IOU Token Help?
The IOU token is tradable, but not by U.S. users. Once trading begins, the token will be dumped, causing American investors to suffer another fallout.
Bitfinex states on its website that U.S. residents can sell their token to another exchange customer, but they cannot buy them, while non-U.S. residents can buy and sell the tokens without restraint.
Hong Kong to Review Bitcoin
Bitcoin is not currently regulated in Hong Kong, Arthur and Klazen noted, a situation they said is likely to change. They said the Hong Kong government has acknowledged it will be necessary to regulate blockchain technology and that there is a need to address numerous issues as the technology evolves.
The creation and deployment of the most robust security possible to prevent the type of theft that afflicted the bitcoin exchange will ultimately be most valuable to virtual currency investors, they noted.
Bitfinex did not respond to a quest for comment.
Featured image from Shutterstock. Story image from Kobre & Kim.
Last modified: March 4, 2021 4:50 PM