Court Rules that Crypto Exchange That Hosted a Scammer’s Wallet Is ‘Not Liable’ For Victim’s Losses

A domestic crypto exchange is not liable for the actions of a voice phishing scam gang who transferred their victims’ coins onto its platform, said a South Korean judge. 

The case was heard at the Civil Settlement Division of the Seoul Central District Court. An individual named only as ‘B’ for legal reasons claimed they had been scammed, according to Newsis.

The scammers had managed to convince B and at least 10 other co-plaintiffs to send coins to the ring’s wallet, according to B’s lawyers. The wallet was hosted on an unnamed exchange.

The funds were then transferred off the exchange’s platform.

Various ring’s members posed as public prosecutors, financial institutions employees, savings bank employees, and credit card company representatives.

The ring’s wallet was suspended when the scam was exposed, flagged as an account with links to voice phishing. All deposits and withdrawals on the wallet were then halted.

However, B and the other victims argued that the exchange should compensate them for damages claiming that the exchange had failed to “manage and supervise” the wallet. According to their lawyers, the exchange had allowed the ring to abuse its system.

However, the exchange denied the charges, claiming that all the funds that had been kept in the wallet had been withdrawn. That means there was nothing left to return. In addition, the exchange also claimed that it had followed all the required protocols, and therefore it was not liable for damages.

According to the court, the exchange was under “no obligation” to pay the victims what they had requested. Besides that, it also stated that it was “difficult to believe” that the exchange had committed “gross negligence” in the matter.

The presiding judge quoted as follows:

“The voice phishing scammers abused [the exchange’s] business model. It is difficult to believe that [the exchange] adopted its business model in an attempt to participate in or abet voice phishing scams.”

The High Court of South Korea allows parties to appeal civil court cases within two weeks of a verdict.