South Korea Exchange Divvies Losses Among Members
Over the weekend, South Korean Exchange Yapizon was the victim of a massive bitcoin heist. According to its statement, on April 22, 2017, a hacker breached four hot wallets and stole a total of 3831 bitcoin, which sums to about 5.5 billion Won or about 5 million dollars, at the time of this publication. As a result, the exchange experienced a 37.08 percent loss in assets which will be dispersed equally to all Yapizon account holders.
“After many discussions, legal and accounting consultations and reviews, we have come to the conclusion that losses incurred in this case should be fairly applied to all members. It is also the most common way to go through the liquidation process.”
To recover from the incident, the Yapizon CEO, managers, and directors will “abandon the property right to their company as much as possible to resolve the case” and issue ‘Fei’ tokens to “priority members.” Fei is a service product that Yapizon has traded since 2014. Initially, the token will compensate 10 percent of the 37.08 percent loss; however, Yapizon’s statement outlines specific details on subsequent operations that will distribute Fei for the total amount of damages within six months.
This mirrors a similar accounting scheme that Taiwanese exchange Bitfinex committed to last fall. In August 2016, Bitfinex was the victim of a cyberattack that resulted in a loss of about 70 million dollars’ worth of bitcoin which amounted to a 36 percent total loss of assets across the board for all members. To counter the attack, Bitfinex issued members BFX tokens. Despite Bitfinex’s recent woes, Yapizon is justifying its accounting trickery by the fact that its Taiwanese counterpart is functioning as “a bigger company now.”
Although the exchange has acknowledged that it has “filed a complaint with the investigating agency,” South Korea currently lacks regulation for mishaps like cyberattacks on exchanges. At the moment, exchanges handle breaches as they see fit and in Yapizon’s case, this resulted in an impromptu accounting scheme. However, heading into 2017, that could change.
In November 2016, the South Korean Financial Services Commission announced it would be introducing regulation for cryptocurrencies in 2017. This is huge, as once the correct regulation is in place, incidents like the Yapizon breach could protect members of exchanges and subsequently re-instill trust in the South Korean cryptocurrency institutions.