$5 300 000 USD
DESCRIPTION OF EVENTS
"Founded in 2018, Coinzest is a centralized cryptocurrency exchange located in South Korea. It provides users with Crypto to Crypto and Crypto to Fiat trade services, as well as other financial/investment tools." "CoinZest is an exchange registered in South Korea that launched in June 2018. Accordingly, the exchange recently celebrated its 1 year-anniversary."
"The exchange provides information on its parent company (Zest C&T Co., Ltd) and its CEO (Jeon Jonghee, Kim Seungyong) on its website." "Over 50 coins are already listed on the Coinzest exchange, all of which are traded in 71 different markets. The platform allows for extensive market analysis through its user friendly interface that is equipped with numerous chatting tools and indicators."
"CoinZest has added to the recent spell of bad news for Korean exchanges when it was revealed that they accidentally airdropped millions of dollars’ worth of cryptocurrency to their users after a promotional campaign backfired. After realizing their mistake, CoinZest conducted a ‘rollback’ on their servers that undid the airdrop and returned the tokens to the exchange, but not before those who got wise had made hasty withdrawals. This mistake added to the news earlier this week that a CEO and an executive of another Korean exchange, Komid, had been given jail sentences for falsifying trading volume."
"CoinZest were involved in a promotion with gaming blockchain project Wager Games, where they intended to hand out hundreds of WGT tokens to their customers, but a “computer error” led to them mistakenly dishing out over $5 million worth of Bitcoin, Ethereum, and other cryptocurrencies instead. CoinZest’s servers were taken temporarily offline as developers raced to resolve the problem by restoring databases to their pre-error state. They also contacted customers who had withdrawn the airdropped tokens, asking them to return them, but this seems to have fallen on deaf ears, as it is reported that some $2.6 million worth is yet to be returned. Whether the customers have any legal right to return the money is as yet unknown and something that, presumably, CoinZest will investigate."
"The CoinZest error is the first known case when an exchange has accidentally put crypto into user accounts. In February 2018 the Zaif exchange temporarily offered customers the opportunity to buy Bitcoin for free due to a computer glitch, although all transactions were cancelled upon discovery of the error. CoinZest’s case is different as up to half the funds may already have been moved on, which presents a huge logistical problem if they wish to reclaim any or all of those funds."
"CoinZest has blamed a “computer error” for the mishap. The exchange’s servers temporarily went offline as developers attempted to resolve the problem, looking to restore databases to their pre-error state, and contacting customers who have made Korean won withdrawals on the funds. The exchange says it has already recovered half of the funds, but, per most recent reports, some USD 2.6 million is yet to be returned."
"Of course, the right thing to do would have been to return the crypto to the exchange. But, those of us who have had our crypto wallets clogged up with valueless airdropped coins that we neither want nor asked for might just be raising a glass to those who withdrew before the servers were reset."
CoinZest launched a large cryptocurrency exchange platform in South Korea. However, one promotion gone wrong caused a massive loss as the exchange distributed and allowed the withdrawal of $5.3m worth of crypto-assets. Attempts at recovery of the funds were unsuccessful and the platform later shut down.
HOW COULD THIS HAVE BEEN PREVENTED?
The CoinZest case is worth platform operators studying, though obviously there is no sure-fire way to prevent balances being wrong. Hot wallets should of course be insured or based on company funds, and our industry insurance fund would be one of few models that would be able to cover such an event. A multi-sig on cold storage provides an increased opportunity to detect the imbalance before funds are released. Exchange platform users are under the obligation to return funds in cases like this, with multi-sig minimizing damanges and the insurance fund covering what ultimately can't be collected.
https://fullycrypto.com/coinzest-exchange-accidentally-hands-out-5-3-million-in-crypto (Oct 2)
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