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Media Coverage
Legal Perspective on the GDAC Hacking Case
Host: Reporter Jang Se-jin Guest: Attorney Hong Puren, managing partner at Decent Law Firm Q. What are the details of the hacking incident involving the cryptocurrency exchange ‘GDAC’? Cryptocurrency exchange GDAC suffered a hacking incident with 20 billion KRW in losses, equivalent to 23% of its stored assets. Q. Are there any past examples of cryptocurrency exchange hacks? Mt. Gox in Japan went bankrupt after 850,000 Bitcoins were stolen. Q. What is Mt. Gox? Mt. Gox was initially a card trading platform and later transitioned to Bitcoin operations. Established in 2011, Mt. Gox saw Bitcoin priced at $1 per coin at the time. Mt. Gox was a platform that allowed the exchange of Bitcoin for cash. It handled over 70% of the world's Bitcoin transactions at its peak. Q. What happened during the Mt. Gox hacking incident? 850,000 Bitcoins were stolen from Mt. Gox in Japan. The Mt. Gox incident was a theft, not a hack. Concerns over the instability of Bitcoin and blockchain arose, causing a massive drop in Bitcoin's price. Q. Are there any inherent issues with Bitcoin or blockchain technology? "It is practically impossible to manipulate Bitcoin or blockchain." Q. If someone gains control of the majority of nodes, could they manipulate the system? "Anyone who holds power over Bitcoin is unlikely to do anything that would devalue it." Q. After Mt. Gox’s bankruptcy, was there any compensation for the losses? Mt. Gox began distributing Bitcoin compensation to its creditors. "There was controversy over the basis for Bitcoin’s market value used for compensation." Q. Are there other hacking cases involving cryptocurrency exchanges? Binance experienced a hack where 7,000 BTC were stolen. Q. Have there been domestic hacking incidents involving cryptocurrency exchanges? Both Upbit and Bithumb have had hacking incidents. "Thorough security measures are essential." Q. What are the common types of hacking targeting cryptocurrency exchanges? Cryptocurrency wallets manage "private keys vs. public keys." There have been cases where exchanges had their private keys stolen, leading to coin withdrawals. Q. How are private keys vs. public keys stored? Hot wallets (cryptocurrency wallets) are convenient for deposits and withdrawals but are "vulnerable in terms of security." Cold wallets store private keys on hardware like USB devices, providing better security. Q. Which is more secure, hot wallets or cold wallets? Generally, assets are stored in a combination of both hot and cold wallets for better security. Q. Is storing cryptocurrency in cold wallets safe? Most investors store their coins in exchange wallets. Q. In the event of a cryptocurrency exchange hack, is compensation for losses possible? If the exchange goes bankrupt, "it may be impossible to recover the coins." Q. What are the potential solutions for compensation in the event of a cryptocurrency exchange hack? In the case of a brokerage firm’s bankruptcy, stock investments are protected. Brokerage firms act as intermediaries, with stocks managed by the Korea Securities Depository. In contrast, if a cryptocurrency exchange goes bankrupt, "the coins are included in the exchange's assets." Q. Are coins included as part of the exchange's assets? Can losses be compensated? Creditors can initiate enforcement actions against the exchange. However, a lack of assets at the exchange can significantly increase the chance of losses. Legal separation, such as placing investor assets in trust, is necessary to protect investors. Q. What precautions should individuals take to prevent personal hacking? Personal hacks can occur through mobile phones. "Hacking incidents often happen after installing suspicious files." Q. Can installing suspicious files lead to hacking? Problems arise when hackers access usernames, passwords, or biometric information such as fingerprints. Q. What precautions should cryptocurrency exchanges take to prevent hacking? For long-term storage, it's advisable to store cryptocurrencies in personal wallets. "Cryptocurrency should be stored by the individual." "If convenience is a priority, distributed storage is recommended."
2023-04-13 NBN NEWS -
Media Coverage
Currency of the future?' A suspicious study group emerges.
As the virtual asset market becomes active again, illegal virtual asset companies are once again on the rise. Fraudulent coin investment recruitment groups, which had disappeared for some time, have reappeared on university campuses. This is a special report by reporter Lee Min-jae. (omitted) Jin Hyun-su, managing partner at Decent Law Firm: "Although key executives have been arrested, the business structure continues through other successors. (In Korea as well, there have been victims of A-coin), and recently, multi-level marketing (MLM) recruiters have resumed their activities and are conducting business." According to the National Police Agency's Economic Crime Investigation Unit, illegal multi-level marketing schemes related to virtual assets have been increasing every year. However, last year's losses were lower than the previous year, likely due to the drop in the price of virtual assets like Bitcoin at that time. Nevertheless, concerns are rising that with growing optimism about a bullish market for virtual assets, the amount of financial damage could increase again. Experts are warning that with the easing of social distancing measures, cases targeting students and the elderly may increase, urging caution.
2023-04-13 Korea Economy TV -
Media Coverage
Real-name account partnership of KakaoBank shaken by increasing legal risks.
PicaCoin, which received 3 billion KRW in listing fees, and FuryEverCoin, involved in the Gangnam murder case, are among the coins listed on Coinone that have raised concerns. In response, KakaoBank, which provided real-name accounts for Coinone, has stated that depending on the outcome of the prosecution's investigation, they may terminate their contract, drawing attention to the result. On the 12th, according to NBN TV’s investigation, KakaoBank stated, “We have been faithfully fulfilling our anti-money laundering obligations in accordance with the Act on Reporting and Using Specified Financial Transaction Information (Special Act).” Additionally, they mentioned, “We cannot disclose the specific details of the real-name account contract with Coinone, but if criminal activity related to coins listed on Coinone, such as FuryEverCoin and PicaCoin, is uncovered through the ongoing investigation by the prosecution and police, the real-name account contract may be terminated.” (omitted) Hyeonsu “Elliot” Jin, managing partner at Decent Law Firm, commented, “According to Article 7, Paragraph 3, Subparagraph 2 of the Special Financial Information Act, a contract with a bank is essential to operate a KRW exchange. It is likely that the contract includes a clause allowing termination if criminal activity or other legal issues arise. Depending on the results of the prosecution's investigation, if Coinone loses its contract with KakaoBank and fails to secure another bank, it could lose its status as a KRW exchange.”
2023-04-12 NBN NEWS -
Media Coverage
Repeated cryptocurrency exchange hacks and unclear compensation for damages lead to a decline in trust.
Recently, the South Korean cryptocurrency exchange GDAC was hacked, resulting in a loss of approximately 20 billion KRW in cryptocurrencies, which is expected to deal a significant blow to the domestic virtual asset market. Experts point out that smaller cryptocurrency exchanges are likely to struggle to attract investment to cover losses due to a decline in trust following such incidents. It is also expected that compensation for consumer damages caused by hacking could take a long time. (omitted) Pureun “Ian” Hong, managing partner at Decent Law Firm, which specializes in virtual assets, stated, “The fact that the exchange’s measures to prevent hacking were insufficient falls under internal exchange information, making it very difficult to prove. Furthermore, for financial authorities to step in for damage relief, the decision would depend on the impact it has on the financial market, which is likely to be perceived as relatively minor.”
2023-04-11 biz.chosun -
Media Coverage
With the SEC-Ripple lawsuit nearing its conclusion, what is the outlook for the cryptocurrency market?
Host: Anchor Choo Hye-jung Guest: Attorney Jin Hyun-su, managing partner at Decent Law Firm Q. The SEC-Ripple lawsuit outcome is imminent... What is the outlook for the cryptocurrency market? Ripple Labs developed a remittance service using blockchain technology The SEC sued Ripple, claiming "XRP is an unregistered security" "Ripple Labs violated securities laws by selling XRP to individual investors" Q. Why is the outcome of the Ripple Labs lawsuit important? The Ripple Labs lawsuit could shake the entire crypto market, not just XRP "The result of the Ripple lawsuit could set a global standard for crypto regulation" Q. What is the current status of the Ripple lawsuit? The lawsuit between decentralized Ripple and the SEC is intense The U.S. SEC has urged an immediate ruling on whether Ripple’s XRP sales violated securities laws "Currently, the case is at the legal review stage concerning whether Ripple violated securities laws" "A conclusion could come as early as this year" Q. What are the key issues in the Ripple-SEC lawsuit? Types of securities: • Debt securities • Equity securities • Profit-sharing securities • Investment contract securities • Derivative securities • Depository securities, etc. Investment contract securities (Article 4, Clause 6 of the Capital Markets Act): A contractual right indicating that a specific investor has invested money or other assets in a joint venture between the investor and others, and the profits and losses from the joint venture are attributed to the investor The U.S. Supreme Court's "investment contract" test: ① There must be an investment of money or other assets ② The investment must be in a common enterprise ③ There must be an expectation of profit from the investment ④ The profits must primarily come from the efforts of a third party Q. Is a cryptocurrency a security? Whether a coin qualifies as a security is judged on a case-by-case basis SEC Chair Gary Gensler has stated that "Bitcoin is not a security" "Coins are sold after contracts are drawn up and the project's profits or progress are announced" Q. Is Ripple’s XRP a security? The SEC claims Ripple violated securities laws with XRP Ripple argues that "XRP does not meet the criteria of the Howey Test" Q. What about the security status of Ethereum and Dogecoin? "Ethereum is sufficiently decentralized, so it cannot be considered a security" "Dogecoin is more of an experiment and fun meme coin, so it’s unlikely to be classified as a security" Q. What are the predicted scenarios for the outcome of the Ripple-SEC lawsuit? "There is a high possibility that XRP sales will be interpreted as violating securities laws" "Ripple emphasizes the ambiguity surrounding the concept of investment contract securities" "If XRP is classified as a security, Ripple could face fines or other economic sanctions"
2023-04-10 NBN NEWS -
Media Coverage
Warning issued for wash trading in plummeting cryptocurrencies.
Legal disputes surrounding cryptocurrency investments have increased during the COVID-19 pandemic. While some cryptocurrencies are traded without issues, there has been a rise in "coin crimes," where fraudulent cryptocurrencies, often referred to as "scam coins," are created to lure investors. These coins, which lack clear substance and economic value, are artificially inflated through wash trading and then sold off for illicit profits. As a result, investors need to exercise caution. (omitted) Hyeonsu “Elliot” Jin, an attorney at Decent Law Office specializing in cryptocurrency fraud, stated, “Many cryptocurrencies claim to be listed on famous foreign exchanges, but among them, there are many fraudulent coins. In particular, many elderly investors often transfer money to companies to purchase coins on their behalf. It's advisable to verify the identity of the other party and secure documents such as a business registration certificate and corporate registry before investing." He also added, “Smaller exchanges have a higher risk of fraud, either by issuing their own coins or colluding with coin companies. Therefore, it is safer to invest directly through larger exchanges or those holding a virtual asset business license. If an investment involves complex terms like lock-up (a method that restricts trading for a certain period after listing) or staking (fixing a certain amount of held cryptocurrency as a stake), it should raise suspicion.”
2023-04-09 biz.chosun