Bitgrail’s $170M Hack Continues to Provide Drama
Fallout from the $170 million hack earlier this year of the Bitgrail exchange continues to mount, and this time lawyers are involved. A class action lawsuit was announced against Bitgrail’s Nano core development team, seeking damages and a “rescue fork” to recover funds. In response, a group calling itself Nano Foundation fired back, insisting blame for the hack rests not with developers but with Bitgrail itself, and they’re raising funds on behalf of victims to bring their own suit.
Also read: First Soros, Now Rockefellers Move into Cryptocurrency
Bitgrail Hack Fallout Means Lawsuits
Perhaps emblematic of where the cryptocurrency ecosystem is at present, the Bitgrail exchange hack from earlier this year continues to provide drama. Back during 2017’s massive price run up, at the start of December (Nano was then known as Railblocks, under the ticker, XRB) “1 XRB could be bought for $0.20. One month later, 1 XRB had soared to $35 after gaining 17,500%, making it 2017’s biggest gainer and putting the likes of bitcoin, litecoin and ripple in the shade,” News.Bitcoin.com reported.
Rather suddenly the Italian micro exchange was swimming in hundreds of millions in value. In late January of this year, Bitgrail abruptly suspended trading. Within weeks, the exchange announced an indefinite stoppage due to a 17 million XRB/Nano “shortfall” from a wallet it managed. It assured users authorities were alerted.
Rumors flew: The exchange’s charismatic owner had made off with the loot. Indeed, Nano core devs even alluded to at the very least mismanagement. Bitgrail publically implored its devs to change key aspects of the code in order to return coins to users. Back and forth the two sides have gone, but one thing is clear: 12.7% of XRB remains missing.
By March, Bitgrail announced a 20% return of customer Nano with the other 80% being made up in a new coin, BGS, on one condition: users, upon reanimating their accounts, would be required to sign away future legal claims against the exchange. It is unclear how many customers were eager to take up the offer.
Class Action, Legal Fund
This week, Bitgrail customer Alex Brola’s class action lawsuit against four Nano core developers based in Texas was published online. Mr. Brola’s initial $50,000 investment grew close to 17,000 Nano, according to court documents. His suit begins by attacking the entire project, defining Nano as a security thus placing those associated with its sale as violating US securities law. It then goes on to allege developers misled Bitgrail users in nearly every regard, from the supposed integrity of the system itself against hacks, to Nano devs actively conspiring to ultimately achieve ill gotten gains.
Mr. Brola and the respective class of victims are seeking return of their coins and fiat investments, along with a mandated “rescue fork,” presumably to recover said coins, and restitution in the form of all damages incurred by Mr. Brola and the class as a result. They’d also like an audit, a full accounting, and a trust set up for coin distribution, along with attorney’s fees paid in full.
In response, a group referring to itself as the Nano Foundation claimed it was they who really represented hack victims, and that a legal fund was being established to bring action against Bitgrail exchange. They detail having formed an alliance with “Espen Enger, a representative of nearly 600 Bitgrail victims at the time — now over 1,400, announcing our plans to help establish a legal fund. We had a series of productive initial discussions with Mr. Enger. Over time we became confident that Mr. Enger was the best prepared person to manage a legal fund and a large group of Bitgrail victims in their pursuit of justice in Italy.”
Their stated goal is to help smaller investors. They claim to have doubled the victims’ legal fund from $300,000 to $600,000 as of 9 April 2018, while “will be matching the contributions of the victims to the legal fund established by Mr. Enger — including both past and future donations, for up to $1 million — with a goal of establishing a total legal fund valued at $2 million.” They’ve set up a Discord account as a way to keep tabs on their progress going forward.
Which side do you believe? Let us know in the comments section below.
Images courtesy of Shutterstock.
Need to calculate your bitcoin holdings? Check our tools section.