South Korean Crypto Exchange Coinbin Declares Bankruptcy After $26M Embezzlement

News | February 25, 2019 By:

South Korean cryptocurrency exchange Coinbin is reportedly filing for bankruptcy due to the loss of the wallet manager’s private key, causing financial damage estimated at 29.3 billion won ($26M USD).

Coinbin, which took over hacked crypto exchange Youbit in 2017, said in an announcement on Feruary 20 that the decision to file for bankruptcy was made “due to a rise in debt following an employee’s embezzlement.” As a result, all crypto and cash withdrawals from the exchange were halted at the time of the announcement. Coinbin said cryptocurrency and cash settlements would be done in accordance with bankruptcy procedures.

According to Coinbin CEO Park Chan-kyu, an executive in charge of managing cryptocurrencies, who previously served as the CEO of Youbit, had committed dereliction of duty and embezzled company funds. The executive, known as Lee, reportedly removed hundreds of cryptographic keys to coin wallets containing hundreds of bitcoin, while claiming to lose the key for an ethereum wallet containing 100 ethereum coins.

Park, however, did not believe Lee’s alibi, stating that it was not a mistake but an intentional act in that the executive is a cryptocurrency expert.

“Mr. Lee holds a patent on a cryptographic transaction method using a blockchain structure,” Park said. “In addition, he co-authored the book, “Learning the new bitcoin easily.” This book also covers how to backup / restore a bitcoin wallet. It is not reasonably convincing that the cryptographer Mr. Lee has removed the bitcoin private key separately or printed it out of the paper wallet.”

Lee, on the other hand, insisted that the incident was unintentional, stating that he did not know that he had to back up the wallet’s data files. Regarding the reasons for transferring the bitcoin without charge, he said he used to transfer the whole paper money in the past, so he did not mind exposing the private key to the staff.

“I thought it was impossible to learn the job, so I handled it myself,” Lee said.

Coinbin is reportedly planning to sue Lee for criminal charges such as embezzlement.