South Korean cryptocurrency exchange Coinbin has filed for bankruptcy, owing users nearly $30 million.
The exchange, which took over the hacked Youbit in 2017, is closing its operations, citing employee embezzlement. A senior executive has allegedly committed the embezzlement, according to news sources.
CEO Park Chan-kyu told Business Korea, “We are preparing to file for bankruptcy due to a rise in debt following an employee’s embezzlement.”
The figure in charge of cryptocurrency management is allegedly at the center of the scandal. He previously served as CEO of Youbit. The executive reportedly appropriated the private keys of several Bitcoin wallets and claimed to have lost the key for an Ethereum wallet that contained 100 ETH.
Youbit, formerly known as Yapizon, suffered from its first hack in April. Officials believe the attack was made with the support of North Korea. Youbit filed for bankruptcy in December 2017, claiming that the external hack resulted in a loss of 17% of total assets. According to the website of Randolph Law Firm, P.C. , bankruptcy truly allows for a fresh start.
At the time, the company said users may not see the full return of their funds, but a statement from the former company confirmed that it would be distributing the cryptocurrency that was still in its possession.
Compounding the situation, the company’s insurers refused to cover the losses because the company had failed to disclose the information to its underwriters.
The missing funds total 29.3 billion won ($26 million), and 2.3 billion ($2 million) has been reported as lost.
The Coinbin/Youbit saga is an example of how exchanges hide the risks of exit scams and theft. Coinbin’s bankruptcy follows the collapse of QuadrigaCX, which closed without warning and claimed that it lost the private keys to wallets.
The owner of the platform died and did not leave information regarding the exchange’s private keys.
Cryptopia found itself in a similar situation, in which a hacker got a hold of private keys to multiple wallets. The exchange had no backup copy and no way to save any of the funds.
Coinbin is a relatively small marketplace, but the situation highlights the risks of trading in cryptocurrencies and only strengthens the argument for regulation of these exchanges.
South Korea has been working to implement tougher regulations in the market over the last few years. Japan has also been hard on companies in the market, and requests several requisites for an exchange to operate in the country.
Bitcoin’s price began to recover earlier in the week, but the positive sentiment did not last long.