Blockchain firms face lawsuits as sloppy practices result in unintended payouts – Coinberry, Crypto.com, BlockFi

Over the years, huge sums of money have been lost by countless people with poor security practices. Digital assets have the ability to provide a modicum of financial freedom, but they also require diligence with the sector, often compared to the “wild west”, full of thieves and fraudsters. However, individual investors are not the only ones who have been burned. The following are some examples of blockchain companies falling into the same trap and losing capital as a result of sloppy practices.

Mint berry

In the Great White North, Coinberry is one of the more recognized and popular digital asset exchanges. However, this does not mean that the company is immune to mistakes. According to reports, Coinberry has now filed a lawsuit stemming from an incident in 2020 that saw the company fall victim to a glitch in its system – and the loss of 120 BTC.

The bug that caused the problem allowed customers to buy BTC with FIAT deposits before the funds were actually confirmed. This allowed various bad actors to acquire BTC, and simply cancel pending deposits – and keep both.

While Coinberry was successful in retrieving approximately 30% of its lost BTC, it is now suing 50 different individuals in an attempt to retrieve most of what remains. Notably, Coinberry is believed to have named Binance in the lawsuit, as the rival exchange was used to download the stolen assets.

One user who used multiple identities on the platform, Conner Heffernan/Jordan Steifuk, is believed to have stolen a significant sum amounting to over 10% of the exploit. In total, over 500 accounts have taken advantage of the situation.

Crypto.com

A similar lawsuit has been launched in Australia by none other than Crypto.com. In mid-2021, when processing a $100 refund for a customer, the popular blockchain firm mistakenly sent over $10 million instead. If this was not bad enough, the company did not realize its mistake until a corporate audit was carried out months later – by which time the recipient of the funds had already spent a significant amount, including,

• $1,350,000 home purchased in Melbourne, Australia, then transferred to family in Malaysia
• 430,000 dollars as a gift to others

A total of 8 people were named in the lawsuit.

Naturally, Crypto.com launched a lawsuit in an attempt to recover lost funds, with a default judgment issued days ago regarding Thilagavathy Gangadory (the person in possession of the home). The settlement will require not only the sale of the home, but a repayment of $1,350,000, and over $27,000 in interest, to Crypto.com. The cases involving the 7 others named in the lawsuit continue.

BlockFi

Around the same time Crypto.com slipped up, BlockFi did the same. For the latter, the company mistakenly issued hundreds of BTC, worth tens of millions at the time, into the accounts of nearly 100 customers. The issue stemmed from a promotional event the company held that would reward accounts with rewards for incremental trading activity.

Source: Twitter @BlockFi

In an attempt to get the money back, BlockFi then offered affected accounts a reward of $1,000 in GUSD for trouble if they were returned, before threatening to sue others. While it is unclear how much of the funds BlockFi was able to recover, this was unfortunately just one of many missteps the company has made over the years.

Trust must be earned

Each of the above examples highlights the dangers of a nascent industry. If platforms expect to earn the trust of the public and regulators, such incidents cannot continue to happen. How can users rest easy knowing that their money is safe when such exploits continue to occur? Trust is not given – it must be earned.