Mark Shin Argues Against Full Forfeiture of Crypto Profits in Legal Fight with ICON Foundation

News | July 4, 2024 By:

On Thursday, June 20, 2024, Mark Shin filed a memorandum in his lawsuit against ICON Foundation regarding the requested relief in the case.

The case involved allegations that Shin exploited a software bug on the decentralized ICON Network in August 2020 to generate nearly 14 million ICX tokens, which is the native cryptocurrency used on the ICON blockchain, without authorization.

In its summary judgment order, the U.S. District Court for the Northern District of California found that Shin did not have a legitimate claim to the bug-generated tokens. While the exploitation of software bugs is not explicitly against the rules, Shin understood the tokens were a result of anomalous network behavior and not the standard staking and rewards process.

The memo outlines Shin’s position that ICON’s requested remedies are inequitable and go beyond simply restoring the network to its status before a software vulnerability occurred. The vulnerability temporarily allowed Shin to generate new tokens on the ICON blockchain known as ICX.

ICON, a nonprofit association that develops the ICON protocol and oversees the governance of the ICON decentralized network, maintains the ICX tokens generated by Shin harmed the network. ICON has counterclaimed seeking full disgorgement of profits from Shin related to the generated tokens, which Shin disputes.

In the memo, Shin argues ICON’s requested relief exceeds the scope of fair restitution. He notes that confiscating all profits intermingles legitimately obtained personal assets with those derived from the generated ICX tokens. Shin suggests ICON has not proven what portion of seized assets, currently held in receivership, are validly traceable to the network vulnerability.

Shin also rejects ICON’s request for non-restitutionary remedies like profit disgorgement. He asserts ICON has no proprietary interest in the generated tokens themselves, nor in any assets not directly resulting from ICX transactions. The memo posits Shin did not consciously violate any legal duty or protected interest in interacting with the ICON blockchain as designed.

If ordered, Shin’s memo proposes the narrow remedy of destroying only the 6,692,152 remaining ICX tokens attributable to the software bug, rather than granting wider windfall remedies. It raises concerns ICON’s proposed relief could artificially impact ICX token prices and benefit insider traders.

The memo filing indicates the legal battle over responsibility and appropriate remedies continues between Shin and ICON regarding the lingering effects of the August 2020 software anomaly on the ICON decentralized network and its governance of the ICX cryptocurrency tokens.

Please contact BlockTribune for access to a copy of this filing.