Supreme Court: Bithumb to Compensate 250 Million Won to Victims of System Failure

[Asia Economy Reporter Kim Hyung-min] Some investors who suffered losses due to a system failure at the domestic cryptocurrency exchange Bithumb in 2017 will receive up to 8 million KRW per person in compensation.

According to the legal community on the 13th, the Supreme Court's 2nd Division (Presiding Justice Cheon Dae-yeop) upheld without oral argument the lower court ruling ordering Bithumb's operator to pay a total of 251,388,000 KRW (ranging from a minimum of 8,000 KRW to a maximum of 8 million KRW) to 132 investors who filed a damages lawsuit against the operator.

A citizen is checking the transaction status board in front of the Bithumb branch, a cryptocurrency exchange in Jung-gu, Seoul.
[Image source=Yonhap News]

On November 12, 2017, Bithumb announced to its members that a system failure had occurred after the hourly order volume, which was usually around 100,000 orders, surged to over 200,000 orders, causing the transaction failure rate to exceed 50%. Subsequently, after server inspections, memory resets, and traffic control measures, trading resumed approximately 1 hour and 30 minutes later.

The investors filed a lawsuit claiming that during the trading suspension, the prices of cryptocurrencies such as Bitcoin Cash (BCH) and Ethereum Classic (ETC) plummeted, causing losses equivalent to the price difference.

The first trial court ruled in favor of the operator, stating, "It is difficult to recognize negligence on the part of the company for not taking measures reasonably expected under social norms to prevent the system failure."

However, the appellate court reversed the decision, stating, "The plaintiffs experienced anxiety and frustration because they could not place sell orders at their desired prices due to the system failure despite the rapidly declining cryptocurrency market. It is necessary to protect the mental distress caused by this."

Regarding Bithumb's claim that the system failure occurred due to an explosive and unpredictable surge in trading volume within a short period, and that they had fulfilled their usual duty of care, the appellate court rejected this, stating, "The burden or cost arising from technical failures should be borne by the service provider, the defendant, and cannot be passed on to the members who use the service and pay fees."

This content was produced with the assistance of AI translation services.