A Californian judge has upheld a legal claim by a cryptocurrency investor who exploited a coding flaw on the ICON decentralised network to amass 14 million ICX tokens worth almost US$17 million.
Staker Mark Shin filed a lawsuit against ICON for interfering with his property rights after the blockchain network discovered the error in its protocol and froze access to Shin’s ICX tokens.
In an order issued on August 9, US Federal District Judge William H. Orrick denied ICON’s attempt to dismiss the complaint, finding that Shin had “a plausible claim” – allowing the lawsuit to proceed.
DeFi Case Raises Novel Legal Issues
Shin amassed his huge stash of ICON’s native tokens by repeatedly exploiting a bug whereby the protocol added 25,000 newly minted ICX tokens to his account every time he initiated a redelegating process (transferring staked tokens between network nodes).
The judge said that while it was disputable whether common law property rights should apply to digital assets, Shin had made a case for his ownership of the tokens. As Judge Orrick stated:
Shin plausibly asserts that he has a stronger claim to possession of and title to the ICX tokens than ICON because he minted, created, and staked a claim to the ICX tokens on the blockchain.
Judge William H. Orrick
Denial of the motion to dismiss does not resolve the legitimacy of Shin’s ownership of the tokens.
Exploitation and Hacks on Blockchain Platforms
A number of decentralised platforms have been compromised of late. Just this week Poly Network was the victim of the biggest DeFi heist in history, losing over US$600 million in a white-hat hack, though a portion of the funds have since been returned.
Last month, an unforeseen bug on Thorchain exposed the network to an attack that drained US$4.9 million worth of Ethereum from the protocol. Also in July, decentralised NFT platform Bondly Finance’s token crashed in value after an alleged exploit, although many suspect it was an exit scam.