Financial transactions are painstakingly done because mistakes are very costly. Funds wrongly sent or hacked are rarely recovered because there are many people who are comfortable with spending funds that do not belong to them or even eager to steal if they are able to.
A Korean bitcoin exchange Coinnest made a massive blunder by mistakenly sending out billions to some users of the platform. The incident happened during a planned distribution of We Game Token (WGT) . Unfortunately they ended up sending out an airdrop. According to information that made the rounds on Monday, 6 billion Korean won valued $5.3 million and some bitcoins were inadvertently distributed to users some of whom withdrew the funds as soon as they noticed it.
Bitcoin Price Drop
The officials of the company later came out with a statement that the $5 million in BTC was airdropped as a result of the mistake. The losses incurred by the exchange resulted in the bitcoin price dropping by $50.
The quest to recover the sent funds proved abortive as it became obvious that users who got the funds scrambled to sell them quickly. The exchange was left with no option than to try retrieving the fiat funds.
The quest to retract the fiat went on as planned but the exchange could recover just half of the $6 billion won since most of the recipients had pulled out their funds.
Notoriety for Blunders
Obviously, the recipients of the bitcoin airdrop have no plans of returning them despite the appeal of the exchange which is nearly becoming notorious for blunders. The news is reminiscent of the allegation that made rounds last year that the company’s chief executive embezzled some funds.
This pointed to the suspicion that the company’s management system is below par. This will likely make many traders skeptical about using the exchange.
Kim Ik-hwan who was the company’s chief executive officer was accused of cornering deposits into his personal account. The fall-out resulted in his removal by the company board in a quest to restore investor confidence.
The exchange seems to have barely recovered from the Q1 2018 crisis when week’s incident occurred. This has raised questions about its mode of operation since such mistakes are rare occurrences.
Obvious Operational Flaws
Coinnest is now calculating its losses and brainstorming on damage control not necessarily in terms of recovery of funds but the effect on its business since it is obvious to users that there are flaws in the company’s operational protocol.
Exchanges are sometimes caught napping by hackers. Rarely do you encounter issues like accidental airdrops such as this. The humor in the situation is that some users of the exchange who were airdropped bitcoins would thank their luck that such unexpected fortune smiled on them.
The company is aware that some losses are not recoverable but still made efforts at damage control. Like the Kim Ik-hwan case, the detail of the misdirected airdrop is still sketchy but we are watching the story closely.
No Statement On Compensation for Traders
The server problem affected trades on the exchange but it seems that the traders are not high on priority list at the moment considering the present situation. It has not mentioned compensating the losses that traders incurred as a result of the event. What is clear is that Coinnest losses are manifold since it recovered just half of its lost assets.
There is little change of total recovery since few people are known to ever willingly refund such funds unless Coinnest takes advantage of all the resources at its disposal to involve authorities in its recovery quest since customers are routinely KYCed by exchanges.
Korean bitcoin exchanges are among the biggest and are mostly in the news for the wrong reasons despite tight regulatory policy for exchanges in the country.
Caused BTC Dip
The speed with which the receivers of the airdrop quickly sold their coins was instrumental to the drop in its value by $50. People’s conduct over such issues is not surprising.
A couple of years ago in Sydney, an ATM had an unusually long queue because it was dispensing 20 AUD for 10 AUD. Such error may have been caused by a hassled banker who loaded 20 dollar bills in folds meant for 10 dollar bills.
Errors do happen but some are very costly especially when money is involved.
What’s your experience with funds mistaken sent to your wallet? If that happens will you keep or send it back? Please send in your opinions in the comment box below.
