Crypto Exchange Coinone Wins South Korean Court Battle Over Doubled Bitcoin Withdrawals

Coinone, a South Korean cryptocurrency exchange, successfully appealed a court ruling, compelling five customers to return Bitcoin (BTC) they had double-withdrawn in 2018 due to a software glitch. The Seoul Western District Court’s decision cited “unjust enrichment,” arguing the traders profited unfairly.

The incident stemmed from a software error where Coinone’s system, experiencing delays in Bitcoin network confirmations, incorrectly registered transactions as failed. This led to the automatic replenishment of users’ accounts even after successful withdrawals. Exploiting this, the five traders subsequently withdrew the same Bitcoin a second time.

This occurred during a period of significant congestion on the Bitcoin network, characterized by high transaction fees (reaching a then-record $55) and a massive backlog of unconfirmed transactions (approximately 250,000) in the memory pool. This congestion was a culmination of long-standing scaling issues that ultimately resulted in the Bitcoin Cash (BCH) hard fork the previous year. The court’s appellate ruling differentiated this network delay as an external event, absolving Coinone from responsibility for the loss and placing the onus on the traders to return the funds.

A lower court had initially held Coinone partially responsible, attributing the issue to its server shortcomings. However, the appellate judges viewed the network congestion as an external factor beyond Coinone’s control. This contrasts with the lower court’s decision, emphasizing the distinction between internal system failures and external network disruptions.

This legal victory for Coinone follows previous controversies. In a separate 2023 case, former employees admitted to receiving substantial bribes (approximately $1.46 million) in exchange for listing specific tokens on the exchange. This highlights ongoing challenges faced by cryptocurrency exchanges in maintaining operational integrity and ethical practices within a rapidly evolving and often volatile market environment. The case underscores the complexities of legal recourse related to cryptocurrency transactions and the importance of robust systems to mitigate such risks.