On April 28, 2018, Mr. Firano released a statement to attempt to divide the victims in their efforts to hold his exchange accountable, here is my response:

Over the last three months, Mr. Firano has done nothing to assist the community of victims in understanding the details of the Bitgrail insolvency and has failed to work with the victims on a mutual plan to return as many funds to the victims as possible. Instead, Mr. Firano has devised his own plan to entice the victims into giving up their legal rights in exchange for returning their own funds to them. To understand how unreasonable Mr. Firano’s proposed solution is, some cold hard facts are required.

Bitgrail Assets: In calculating the assets available for distribution to the victims, Mr. Firano has only included amounts in the Bitrgail Representative 1 and Bitrgail Representative 2 wallets, totaling 4,001,097.979112 NANO. Mr. Firano has not included any XRB held personally or obtained through trading fees.

If the victims are successful in forcing Mr. Firano into bankruptcy, a judge will conduct a full accounting of Mr. Firano’s assets, which may include other assets that the victims are not yet aware of. Most importantly, an independent third-party will be responsible for accounting for these assets, not Mr. Firano. Without such an independent third party to take control of the situation the victims will never be able to verify the fact of the “theft,” the total amount of the loss in each currency, and the total value of all of the assets available to reimburse the victims.

Many of the Bitgrail victims have also sustained losses in currencies other than Nano and there were multiple reports of flawed transactions in currencies other than Nano on Bitgrail. It is my belief that Mr. Firano has blamed Nano to attempt to absolve himself from any responsibility for running an exchange that was deeply flawed.

2. Misleading Dates: Mr. Firano has stated on more than one occasion that the theft from his exchange occurred in January 2018, specifically January 19, 2018. In fact, the unauthorized transactions identified by Mr. Firano thus far occurred in October 2017.

Indeed, the historical balance of Bitgrail’s Nano wallet shows a substantial decrease (of over 8 million XRB) in mid-October, from which the exchange never recovered. It is also important to note that in January 2018 at no time did Bitgrail possess 17 million XRB. Additionally, Mr. Firano has publicly stated that at no time did he perform any type of audit or compare his internal database to the amounts in his XRB wallets.

Substantial further decreases in the Bitgrail wallet occurred until December 15, 2017, when Mr. Firano converted Bitgrail’s Nano wallet from a “hot wallet” (an online wallet) to a “cold wallet” (an offline wallet). Beginning in late December 2017, Mr. Firano began engaging in a pattern of conduct that had the effect of placing substantial limits on the ability of users of his exchange to withdraw their funds. And in mid-January, Mr. Firano, for the first time, started an Italian limited liability company to operate Bitgrail and insulate himself from liability.

In February 2018, Mr. Firano attempted to disclaim knowledge of the actual dates of the “hack” by blaming incorrect dates listed on an online block explorer offered as a community tool on raiblocks.net, which dated the transactions as January 19, 2018. Since the Nano protocol does not date transactions, third-party tools (such as Nanode.co) offer such a tool — however, block explorer tools that run on a computer only date transactions when they see them, so if they are offline or are corrupted then they can get the dates wrong. The January 19, 2018, date was generated by the block explorer because the block explorer was re-synced between January 14–19, 2018, and it dated all transactions it had not seen before with a date between January 14–19. It is my belief that Mr. Firano attempted to use the bad dates provided by the third-party block explorer as an excuse for why he waited until February to disclose the October 2017 loss. I have been made aware that Mr. Firano’s own database dated the October 2017 transactions correctly and proof of this has been shared with our attorneys and law enforcement.

Yet, there is an irrefutable way to date nearly any blockchain transaction and that is to look at the blockchain itself (in Nano’s case the public ledger, which records all transactions over the entire history of Nano/XRB, in order). Anyone with basic knowledge of how a blockchain works understands that past blocks cannot be altered once they have been added to the blockchain. By identifying confirmed transactions that we know to have occurred on a particular date, it is an irrefutable fact that other confirmed transactions occurring before the known transaction in the blockchain in fact occurred earlier in time than the known transaction. And when you can date known transactions on either side of an unknown transaction, a reliable conclusion can be drawn that the transaction occurred between those two dates. Accordingly, anyone who wishes to conduct a forensic review of the Nano public ledger would be able to use such dating methods to irrefutably date the unauthorized transactions identified by Mr. Firano as occurring on or before October 23, 2017.

Nevertheless, because of the possibility that valid transactions could have caused substantial declines in Bitgrail’s balances, only Mr. Firano (and the hacker) are capable of confirming that these transactions are in fact unauthorized. Mr. Firano has yet to provide a complete list of the unauthorized transactions that constituted the “hack.” If the transactions that occurred in October 2017 are in fact the source of the current loss of Bitgrail’s funds, then the Bitgrail exchange was insolvent as of October 2017. Again, the judicial system is best suited to determine whether Mr. Firano was blissfully unaware of a loss of over 15 million XRB prior to December 15, 2017 (and possibly in October 2017), or whether Mr. Firano knew of the loss and kept it to himself until February 8, 2018.

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Simply put, it is my belief that Mr. Firano has perpetrated a fraud upon the Bitgrail victims, especially for the majority of victims who deposited funds on the exchange after it was already insolvent. Without the ability to force Mr. Firano to disclose his business records and provide a full accounting of his assets, I and the victims will be unable to fully assess the facts and choose the best course of action. It is unfortunate that Mr. Firano did not immediately announce that he was insolvent upon being “hacked” in October 2017. He would have saved the public a lot of time, money and emotional distress. To this day, Mr. Firano has refused to admit he is bankrupt and to take any responsibility. Because Mr. Firano has chosen such an irresponsible course of action he has forced others to take action.

Mr. Firano’s current communication does nothing to alleviate these concerns. In my opinion, an innocent man does not defend himself by attempting to undermine the credibility of a victim and attempting to dissuade a group of victims from seeking judicial recourse. Mr. Firano’s statement concerning the propriety of collective actions (“As with any class action lawsuit, the higher-ups always end up with the most from these actions and it does not benefit those involved below them.”) is blatantly false and in my opinion constitutes further evidence of Mr. Firano’s repeated pattern of deceit.

As far as the twitter DM’s Mr. Firano has posted from me to him in early February 2018, I imagine that they are not unlike most messages Mr. Firano received from other victims, who no doubt, like me, desperately sought information concerning their funds, directed anger at Mr. Firano, and sometimes, expressed rage at the way Mr. Firano handled the entire situation. I should note that many of the messages I sent Mr. Firano were on February 8, 2018, and were in response to the lack of verifications being performed by Mr. Firano, and were before the announcement by Mr. Firano that Bitgrail was insolvent.

While a litigation may take many months (possibly years) to resolve, our lawyers will not be paid out of the assets recovered because they are being paid out of the legal fund that the Bitgrail victims now have at their disposal. Furthermore, it is my opinion that the bankruptcy process is more likely to result in funds in excess of 20% than the issuance of shares in Bitgrail ever will be, as it is unlikely that Bitgrail will ever be trusted by the cryptocurrency community again. Lastly, I have made it clear to the lawyers representing the victims that the victims prefer that any cryptocurrency recovered from Mr. Firano be distributed to the victims in that cryptocurrency and without conversion into fiat currencies.

Unfortunately, Mr. Firano’s actions are not unique in situations like these. Unprofessional owners of hacked exchanges often disclaim responsibility and attempt to dissuade their victims from taking legal action, while failing to disgorge themselves of their own profits. When the Bitgrail insolvency was announced the victims were angry and alone and most did not have the resources to defend themselves. Now we are organized and well-funded. Despite Mr. Firano’s multiple attempts to manipulate the victims, we will not be deterred in our pursuit of justice against Bitgrail and Mr. Firano.

-Espen Enger