A plaintiff lost a damage claim suit against cryptocurrency exchange Bithumb operator BTC Korea.com on the civil case that the defendant should pay back 478 million won, which was illegally withdrawn by an unidentified hacker from his account in the exchange due to the operator's negligence of responsibility.
The Seoul Central Civil Court on Dec. 23 dismissed the civil suit, judging that the case is not subject to the damage claim clause under the Electronic Financial Trade law, because cryptocurrencies can't be categorized as 'financial assets' by the definition of the law.
The lost case marked the country's first legal manifestation that the act of trading cryptocurrency with no license, nor registration with the watchdog Financial Services Commission is not under the protection of the electronic financial trade act. It also represented the civil court's first judgment that cryptocurrencies should be accepted as digital currencies defined in the Electronic Financial Trade Law.
The case dates back in November 30 when the hacker illegally broke into the plaintiff's account to buy 478 million won worth of cryptocurrency Ethereum with the outstanding balance on the account.
Afterwards, he immediately withdrew nearly all of them illegally from the account over four times each upon the approval of the operator, leaving 121 won worth of rewarding points and near zero Ethereum holdings in the outstanding balance.
The plaintiff claimed in the civil suit that the cryptocurrency exchange must offer as tight security as the legalized financial institutions do and thus by analogical inference, this damage case must go under the protection of the Electronic Financial Trade Law.
Conversely, the defendant argued that the exchange has no legal status that the law entitled as financial institutions and thus has no legal responsibility for the damage.
The court said that cryptocurrencies should not be accepted as digital currencies stipulated in the Electronic Financial Trade Law, because they not only carry no real exchange value to buy commodities, but also are so volatile and so speculative that they can't be traded for cash or bank deposits. The court also insisted that the law must be applied very strictly and narrowly, because the law calls for financial institutions to carry extremely heavy legal responsibility.
The court outrun another of the plaintiff's argument that the exchange has neglected its customer protection responsibility citing as evidence the hacking accident back in 2017 under which information on 36,000 accounts in the exchange were leaked through the so-called Spear Phishing".
The court's counter-argument was that there were no evidence that the plaintiff's accounts were among the victimized accounts.