Court Directs Korean Crypto Firm To Compensate ‘Suspended Service’ Affected Customers

Bithumb’s Temporary ‘service outage’ under Supreme Court’s scrutiny

South Korean Supreme Court is currently seizing on the matter pertaining to Korean crypto firm ‘Bithumb’ and its aggrieved customers.

Bithumb, which is so far the biggest as well as a leading crypto trading platform in Korea, was instituted in a legal battle by its customers.

The legal dispute went up to the Supreme Court which the apex court passed a ruling in favor of the customers and against Bithumb.

The Supreme Court has ordered that Bithumb should immediately compensate customers for their losses caused due to unannounced service outages.

Supreme Court’s judgment calls upon Bithumb to pay over 250 million won (equivalent to $203,120) in total to aggrieved customers as damages.

Currently, there are 132 investors who had lodged a legal suit against the firm for the losses they suffered because of a service outage.

Background of Dispute between Bithumb and Customers

Background facts of the case between customers and Bithumb dated back to November 2017.

In November 2017, precisely on the 12th, an unannounced service outage occurred at Bithumb’s platform. The outage not only disrupted the operations of the Bithumb platform but its impact was beyond that.

During the outage, digital currencies’ value declined immensely which included amongst others Ethereum Classic and Bitcoin Cash. This was a major debacle faced by the platform as well as the users.

Consequently, Bithumb’s customers were unable to manage their digital assets to avoid the losses caused by the immense value decline. The problem arose for the customers out of nowhere.

They had not accounted for the assets to lose their value due to the outage. They were unhappy about the entire downfall and had no intention of facing the losses when they had nothing to do with the outage.

Thereafter the aggrieved customers went to Court and filed a lawsuit against Bithumb for compensation for the losses they had suffered.

Customers claimed in a lawsuit that because of the service outage, the time required for order placement doubled which in turn slowed down transactions.

The court of first instance, however, decided the dispute in favor of the firm and against the customers. Later, the customers filed an appeal before the High Court in which the appellate court ruled in favor of the customers.

High Court also ordered Bithumb to immediately compensate each of the investors out of 137 according to their losses.

Supreme Court’s Decision

Being aggrieved by the appellate court’s decision, this time Bithumb took the matter before the court of final instance i.e. Korean Supreme Court.

On 12th January 2023, Korean Supreme Court heard the matter and passed a ruling which turned out to be against Bithumb.

The Supreme Court noted in its judgment that occurrences such as ‘service outages’ are nothing to do with the customers. Hence, customers should not be burdened with the consequences stemming from a service outage.

The Court finally concluded that a ‘service outage’ was the sole and exclusive responsibility of Bithumb and not the service users. It then upheld the decision of the High Court and directed Bithumb to immediately pay the compensation.

Court noted further that customers avail services by paying commissions and hence they must necessarily be served at all times.

A Landmark Judgement

The Supreme Court judgment is being appreciated in Korea as well as in many parts of the world. People, who are connected with cryptocurrencies, are claiming the judgment to be a ‘landmark judgment’.

They have been further arguing that Korean Supreme Court’s judgment is adopted by all as similar disputes are pending in various countries.

Service outage is quite frequent in the crypto industry which is mostly done at crypto exchanges. The majority of exchanges’ customers argue that outages are mostly deliberate and done by crypto exchanges themselves.

On the contrary, exchanges argue that service outages are beyond their control.

Hence the issue is genuine and to date remains totally unaddressed.

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