Business

Erik Gibbs

Coinrail to restart operations despite hack, controversies

On June 10, Coinrail, the seventh largest cryptocurrency exchange in South Korea, was reportedly hacked, resulting in the loss of $41 million. The exchange temporarily shut down its operations and stated that it has moved 70% of its total coins to cold storage. It also said that “about 80% of the coins that have been confirmed to be leaked have been frozen/withdrawn/ redeemed or equivalent…while the remainder is under investigation with investigators, related exchanges, and coin developers.” Now, the exchange has announced that it plans to resume operations in July, and the decision hasn’t been received well by a number of traders.

In a tweet, Coinrail stated, “Coinrail will resume service before July 15 if it is determined that the service is ready to resume…We are constantly preparing a number of measures to recover the damaged coins and we will be reporting progress on the restoration measure at the end of June.”

At least 50 customers attempted to visit the Coinrail office in Gangnam, Seoul, on Monday, but were turned away, according to local reports. A notice on the door advised the visitors that they would not be able to enter the exchange’s headquarters.

The hack received a certain dubious response by traders. Many pointed out that, just before the theft occurred, Coinrail had changed its Terms of Service, eliminating a key clause that protected users. Specifically, the clause stipulated that the exchange couldn’t be held responsible in the event of losses. The clause was allegedly removed only a week before the hack.

Coinrail responded to the accusations saying that it was only acting in accordance with regulations. The company explained, “We have been working to strengthen the responsibility of the company in accordance with the government’s policy with the revision of the terms of the contract.”

The Korean Fair Trade Commission (FTC) inspected the Terms of Service of 12 different exchanges in April. The group found 14 different clauses that it deemed to be unfair and recommended modifications. Bithumb and other exchanges complied with the recommendations, while Coinrail opted to remove the clause completely.

In April, some South Korean banks were alerted to suspicious activity coming from Coinrail accounts, and moved to close the accounts that month. Coinrail has repeatedly said that those accounts were only unused accounts.

There’s an old English saying that seems to be appropriate in this case. “Fool me once, shame on you. Fool me twice, shame on me.”

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