CoinBin Declares Bankruptcy

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CoinBin

As a special privileged investor and CEO, Park Chan-kyu was given authority to make a transaction on his own from the customer funds. Despite his many years of experience, he apparently messed this transaction up and accidentally sent the funds to the wrong wallet. The end result was that the Coinbin exchange declared bankruptcy and all customer funds were lost.

This exchange or platform is based in South Korea, or the incident targeted people primarily in South Korea.

About CoinBin

Coinbin was "the third-largest cryptocurrency exchange in South Korea." It has a slogan of "reliable cryptocurrency exchange". "Coinbin's goal [was] to 'contribute to the happy life of human beings through blockchain technology'." "Coinbin was established with the purpose of developing various businesses based on the block chain called the 2nd Internet Revolution."

"Coinbin acquired Youbit in 2017." "In the first half of this year, [CoinBin] acquired Yapian, which operated Youbit." "The biggest difficulty in the acquisition process has embodied the compensation plan for customers suffered hacking damage, and, was the one going to run, internally, was to inherit the power to hire staff morale has fallen by maintaining the continuity of the business."

"As an activity to strengthen security, we operate a 24-hour monitoring team composed of internal and external security experts. In particular, we introduced the security solutions of “Naru Security,” which possesses the best domestic network technology, and “Symantech”, a security company, to create a 'network'. Separation and e-mail security have been strengthened." "In addition, we are focusing on security by using additional OTP authentication and IMPERVA's external hacking blocking system."

"[T]he Hot2cold wallet developed by Genesis Khan is applied. This wallet stores more than 90% of customer assets in the cold wallet, while maximizing its usefulness with the hot wallet, and is characterized by strong security. For this purpose, overseas professional technicians are dispatched for two years of project execution, and if system and security problems arise, a professional team will also participate."

"In a cryptocurrency exchange, stability, security and speed are vital. Coinbin has improved the stability and security of transactions, and is in the process of additionally acquiring international security certifications ISO27001 and ISMS security certifications. In addition, we plan to open the world's first decentralized exchange with the fastest transfer speed by applying the Hot2cold wallet to ensure the safety of the coin wallet and introducing the highly scalable perpetual block chain."

"Company location: 6th floor, 499 Gangseo-ro, Gangseo-gu, Seoul (Gayang-dong, Daeha Business Office)"

"Coinbin, the South Korean cryptocurrency exchange that took over hacked exchange Youbit, has filed for bankruptcy owing users almost $30 million, correspondence from the company confirmed on Feb. 20." "Coinbean CEO Park Chan-gyu held a press conference at its headquarters in Gangseo-gu, Seoul." “We are preparing to file for bankruptcy due to a rise in debt following an employee’s embezzlement,” Park Chan-kyu, CEO of Coinbin, told reporters in its Seoul office. "Local media including English-language resource Business Korea subsequently reported."

"According to available information, the figure in charge of cryptocurrency management is at the center of the scandal, having previously served as CEO of Youbit. The latter ceased to exist in December 2017 after two major hacks made operations no longer possible." "CEO Park raised suspicions of embezzlement and breach of trust by Lee, the former CEO of Youbit. The former CEO of Youbit, Mr. Lee, worked as the head of operation at Coinbean after Youbit was acquired by Coinbean."

"Mr. Lee is known to claim that he has lost the private key (secret key) of the cold wallet (cryptocurrency wallet that is not connected online) that currently contains cryptocurrency. The amount of damage reported by the company is about 520 bitcoin (BTC) and 101.26 ether (ETH), and this amount alone is about 2.35 billion won."

"According to Coinbin, on October 21, 2018, General Manager Lee Jin-hee, who is in charge of the exchange system operation and management of coin deposits and withdrawals, deleted the cryptocurrency private key owned by Coinbean, resulting in 520 BTC (about 2.2 billion won) and 101.26 ETH (Ethereum). , about 150 million won), etc., were unable to find cryptocurrencies worth a total of 2.35 billion won."

"In a blockchain, the private key acts as a password. If you lose your private key, you cannot transfer the cryptocurrency in the wallet. In general, in order to prevent leakage and loss of private keys, cryptocurrency exchanges store them in cold wallets that are not connected to online access, hard wallet-type ledgers, or physical paper wallets. In addition, to compensate for the fact that if the private key is lost, it is prepared for emergencies such as secondary and tertiary backups."

CEO Park said, "Ex-CEO Jin-hee Lee is a cryptocurrency expert, and he has always talked about the importance of managing cryptocurrency wallets." He said that he plans to sue former general manager Lee on charges of breach of trust and embezzlement.

On the other hand, former general manager Lee said in his police report, "I have been responsible for inputting the transfer amount, transfer address, and password when transferring coins between wallets as the head of the department at Coinbean. However, access to the wallet server and backup management of wallet data files are I didn't know that another employee was in charge and that I had to back up my private key after depositing and withdrawing cryptocurrency."

"As a result, all cryptocurrency and cash withdrawals from the exchange were halted at 3:00 p.m. on the day. Cryptocurrency and cash settlements would be done in accordance with bankruptcy procedures, Coinbin said. “Park revealed the Coinbin employee in charge of cryptocurrency balances at the exchange, also the previous CEO of Youbit, had neglected his responsibilities and embezzled Coinbin funds.”

"The total funds missing currently amount to 29.3 billion won ($26 million), of which 2.3 billion ($2 million) is reported as lost."

This exchange or platform is based in South Korea, or the incident targeted people primarily in South Korea.

The background of the exchange platform, service, or individuals involved, as it would have been seen or understood at the time of the events.

Include:

• Known history of when and how the service was started.
• What problems does the company or service claim to solve?
• What marketing materials were used by the firm or business?
• Audits performed, and excerpts that may have been included.
• Business registration documents shown (fake or legitimate).
• How were people recruited to participate?
• Public warnings and announcements prior to the event.

Don't Include:

• Any wording which directly states or implies that the business is/was illegitimate, or that a vulnerability existed.
• Anything that wasn't reasonably knowable at the time of the event.

There could be more than one section here. If the same platform is involved with multiple incidents, then it can be linked to a main article page.

The Reality

This sections is included if a case involved deception or information that was unknown at the time. Examples include:

• When the service was actually started (if different than the "official story").
• Who actually ran a service and their own personal history.
• How the service was structured behind the scenes. (For example, there was no "trading bot".)
• Details of what audits reported and how vulnerabilities were missed during auditing.

What Happened

The specific events of the loss and how it came about. What actually happened to cause the loss and some of the events leading up to it.

Key Event Timeline - CoinBin Declares Bankruptcy

Date	Event	Description
February 20th, 2019	Main Event	Expand this into a brief description of what happened and the impact. If multiple lines are necessary, add them here.

Technical Details

This section includes specific detailed technical analysis of any security breaches which happened. What specific software vulnerabilities contributed to the problem and how were they exploited?

Total Amount Lost

The total amount lost has been estimated at $26,000,000 USD.

How much was lost and how was it calculated? If there are conflicting reports, which are accurate and where does the discrepancy lie?

Immediate Reactions

How did the various parties involved (firm, platform, management, and/or affected individual(s)) deal with the events? Were services shut down? Were announcements made? Were groups formed?

Ultimate Outcome

What was the end result? Was any investigation done? Were any individuals prosecuted? Was there a lawsuit? Was any tracing done?

Total Amount Recovered

There do not appear to have been any funds recovered in this case.

What funds were recovered? What funds were reimbursed for those affected users?

Ongoing Developments

What parts of this case are still remaining to be concluded?

General Prevention Policies

The keys for the ethereum and bitcoin wallets of customers were left under the access of a single individual. Enforcing the setup of a proper multi-signature cold storage for customer funds would have meant that the transaction would have required the oversight and approval of at least three individuals to be executed. No single person should be trusted, regardless if they have managed other exchanges in the past or are well known in the community.

Individual Prevention Policies

No specific policies for individual prevention have yet been identified in this case.

For the full list of how to protect your funds as an individual, check our Prevention Policies for Individuals guide.

Platform Prevention Policies

Policies for platforms to take to prevent this situation have not yet been selected in this case.

For the full list of how to protect your funds as a financial service, check our Prevention Policies for Platforms guide.

Regulatory Prevention Policies

No specific regulatory policies have yet been identified in this case.

For the full list of regulatory policies that can prevent loss, check our Prevention Policies for Regulators guide.