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South Korea-based cryptocurrency exchange Bithumb has won the first of a series of lawsuits seeking the recovery of mistakenly sent Bitcoins. The court ruled that approximately 194 million South Korean won, or about $145,000, earned from the sale of the erroneously sent Bitcoins, must be returned to the exchange.
The lawsuit stems from an error in Bithumb’s reward distribution campaign in February. The exchange mistakenly sent a total of 620,000 Bitcoin to user accounts as part of the event. The market value of these Bitcoins at the time was reportedly around $5 billion.
After realizing the mistake, Bithumb initiated a process to recover the crypto assets that were mistakenly distributed. In a statement in March, the exchange announced that it had managed to recover approximately 99% of the Bitcoins that were sent in error. However, since some users did not return the assets, Bithumb resorted to legal action to collect the remaining amounts.
The latest ruling is the first of four lawsuits Bithumb has filed against users who failed to make refunds. The court’s decision in favor of the exchange in this first case could strengthen Bithumb’s position in the other three ongoing lawsuits. The company is expected to seek compensation for lost assets in those cases on similar grounds.
Details regarding the legal grounds on which the court’s decision was based have not yet been made public. It is also unknown at this stage whether the defendant user will appeal the decision.
The incident has brought to light the operational risks inherent in automated reward and distribution systems on cryptocurrency exchanges, while also highlighting the importance of legal processes in recovering erroneous transfers. Bithumb’s decisions in three other cases could set a significant precedent regarding user liability in similar erroneous cryptocurrency transfers.
*This is not investment advice.