- South Korean exchange Coinnest lost 5.3 million USD after accidentally transferring crypto assets and fiat to their users
- The mistake happened during a WGT airdrop
- This is not the first time the exchange gets in trouble, with their former CEO being arrested last April
Last week, South Korea-based exchange Coinnest had planned to make an airdrop of We Game Tokens (WGT) to their users. However, due to internal error, instead of transfering WGT the exchange transferred 6 billion Korean won (which translates to 5.3 million US dollars) worth of assets to accounts of their clients. Among the cryptocurrencies involuntarily transferred to users of the service are Bitcoin, Ethereum and others. What’s more, because of this server error some of the users received some amount of Korean won. The error itself was eliminated on January 19th.
Flash crash as users scrambled to withdraw
The mistake was followed by other inconveniences for Coinnest. For example, some traders started immediately selling their received assets, including BTC, which caused a flash crash on the exchange. The price of BTC on the exchange reduced to 50 USD during the crash.
The other problem for the exchange is that it is extremely hard to retrieve the funds without damaging the reputation of Coinnest. The exchange is planning to do it by rolling back transactions and asking customers to return the funds. As for now, the exchange has already accounted for approximately 50% of the won transferred but is still waiting for the other 50% to return.
The last issue is that there are lots of traders who lost the money due to the error. The exchange, however, did not announce any plan to compensate traders who suffered due to the server issue yet, which could possibly lead to further damage of its already bad reputation.
Not their first time in the news spotlight
Coinnest has been involved in scandals before this incident as well. In April of last year, South Korean authorities arrested the co-founder and CEO of Coinnest, Kim Yik-hwan, alongside with multiple other top-level employees of country’s crypto exchanges on charges of embezzlement. After the incident, the Coinnest board of directors rapidly removed their former president and apologized to their users for any negative impact they had experienced due to the alleged embezzlement.
Such scandals are becoming more frequent in South Korea. Recently, a South Korean court has sentenced two executives including CEO of the crypto exchange Komid to jail for faking trading volume and misleading clients.