Hacked South Korean Bitcoin Exchange Yapizon Offers IOUs

This past week a South Korean bitcoin exchange called Yapizon was hacked for 3816 BTC or roughly $5.3 million USD worth of bitcoins on Saturday, April 22. The exchange has made a statement concerning the hack and plans to offer an IOU token to its customer base to cover losses.

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3816 BTC Stolen From the Korean Bitcoin Exchange Yapizon

According to the bitcoin exchange Yapizon, four of the company’s hot wallets were compromised on April 22, between 2:00 to 3:00 in the morning. Yapizon says roughly 36 percent of funds were stolen and they have filed a complaint with the Cyber Investigation Division of Seoul, the local police. After the hack, Yapizon says they have spoken with their legal team and have decided to split the loss among its customer base.

“After many discussions, legal and accounting consultations and reviews, we have come to the conclusion that it should be applied fairly to all members,” explains the Yapizon exchange. “It is also the most common way to go through the liquidation process.”

The trading platform details that they are not spreading losses to KRW accounts but only virtual holdings including BTC, ETH, and LTC. Yapizon says executives and the CEO have relinquished property rights to resolve the case and will be paying its members with a token called “Fei.” Furthermore, the Korean exchange says they will also provide customers the opportunity to trade the Fei into shares of Yapizon’s “Yahoo Japan” stock.

A Bitfinex Precedent?

After hearing the news, many bitcoin proponents were dismayed to hear the exchange was using the same IOU method Bitfinex used this past summer. According to Bitfinex, the company has reimbursed all of the losses from the breach in August. However, many bitcoiners commenting on the Yapizon issue say that Bitfinex has created a dangerous standard for hacked exchanges. Even the Korean exchange details that Bitfinex had set a precedent for their decision.

“There is a precedent,” details Yapizon’s theft announcement. “The largest Bitcoin trading company in the world, known as Bitfinex in Hong Kong, was hacked in August 2016 and suffered a loss of 120,000 bitcoins (about 22 billion won), and its assets were down by about 36%.

After temporarily issuing coupons equivalent to the amount of the damage to members, it has become a bigger company now, and it has removed the loss by repurchasing the coupon from its members every month.

‘Fei’ Distribution Process Time Frame Not Disclosed

The exchange is a relatively small trading platform amongst larger exchanges in the South Korean region like Bithumb, Korbit, and Coinone. Yapizon doesn’t detail any more information about the incident, and the exchange does not seem to be operational. The Korean company does give details on the Fei distribution process but does not disclose when that will happen.

“We are sorry to have caused an economic loss to you,” Yapizon adds. “We will do our utmost to maximize profits for our members by minimizing the loss and increasing the price of ‘Fei’ through the growth of our company and growing our shareholder value.”

What do you think about the Yapizon exchange hack? Let us know in the comments below.

Images via Shutterstock, Yapizon, and Pixabay.

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