Russian and CIS High-Net-Worth Clients Launch Class Action Against Atomic Wallet Following $100M Crypto Heist

News | August 24, 2023 By:

German business media agency BNE IntelliNews reported on August 21, 2023, that a class action is being launched against crypto platform Atomic Wallet by a group of high-net-worth clients from Russia and the Commonwealth of Independent States (CIS). The clients are seeking redress after their funds were involved in a heist totaling $100 million.

The class action is being coordinated by Max Gutbrod, a German lawyer, and Boris Feldman, a co-founder of Moscow firm Destra Legal. Representing about 50 clients, Gutbrod and Feldman are pursuing legal action against Atomic Wallet, alleging that the platform failed to provide information about the hack or report it to the police.

The heist, which took place in June, initially attributed to the North Korean criminal gang Lazarus Group, drained millions of dollars in cryptocurrency from private accounts. However, Feldman believes a Ukrainian group is more likely responsible for the orchestrated attack. Destra is working alongside blockchain analysis experts Match Systems, who are independently investigating the incident on behalf of the investors and have discovered evidence pointing to the involvement of Ukrainian hacker groups.

Atomic Wallet is a cryptocurrency management app available on various operating systems and devices. With over 1 million downloads on Google Play, the Estonia-based Atomic Wallet experienced a breach in early June, resulting in the removal of crypto from the wallets of an unknown number of its 5 million users. Some users reported losing their entire savings.

The exact cause of the breach remains undisclosed as Atomic Wallet has not yet provided specific details from its technical investigation. The platform operates as a non-custodial mobile wallet, allowing users to retain their crypto private keys on their personal devices, thus eliminating the need for a custodian. However, Dyma Budorin, CEO of blockchain security firm Hacken, raised concerns about potential flaws in Atomic Wallet’s design, including insufficient randomness in the generation of recovery phrases, which could have enabled hackers to gain access to the wallets through brute-force methods.

The use of cryptocurrencies has surged among Russians since the conflict with Ukraine began. As financial sector restrictions and the devaluation of the ruble impact the country, many ordinary Russian citizens, as well as financiers and Muscovites, have turned to cryptocurrency exchanges like Binance and Yobit to circumvent sanctions and safeguard their funds by transferring them overseas. While the cryptocurrency market may not offer significant relief to the embattled Russian state, it has become an effective fundraising mechanism for pro-Russian groups and a means for individuals to store their money securely.