Crypto exchange Gemini sued over $36 million Bitcoin, Ethereum exploit

Lavina Daryanani
Source: Bitcoin Magazine

IRA Financial Trust—a leading platform for self-directed retirement and pension accounts—has filed a lawsuit against crypto exchange Gemini with respect to the $36 million hack that took place on 8 February this year. As such, the said exploit involved $21 million in Bitcoin and $15 million in Ethereum and the assets allegedly belonged to customers’ retirement accounts that were held in Gemini’s custody.

Ever since the incident saw daylight, both companies have been playing the blame game by pointing fingers towards each other for being responsible for the loss of funds. The Trust, however, has been working to find resolution for its impacted customers and has now pledged to use the proceeds from the lawsuit to reimburse its customers impacted by the incident.

Outlining all the allegations

The lawsuit alleges that Gemini did not have proper safeguards in place to protect customer crypto assets. It also claims that the exchange failed to freeze accounts within a sufficient timeframe post the incident, allowing criminals to continue moving funds out of customers’ accounts on the exchange after IRA notified Gemini.

Per PR Newswire,

The lawsuit further outlines Gemini’s alleged lack of transparency with its cybersecurity protocols—noting the Gemini Cryptocurrency Exchange platform’s API was designed with only a single point of failure, as stated in the complaint.

As such, Eric Ostroff and Barry Kamar of Meland Budwick, P.A. are representing IRA in the lawsuit. Highlighting why the Trust filed chose to tread on the legal path, Ostroff said,

“IRA Financial filed this lawsuit because, contrary to Gemini’s many public statements about how it prioritizes security, Gemini’s platform inexplicably had a single point of failure that allowed criminals to steal tens of millions of dollars of crypto assets from customer retirement accounts.”

He added,

“This lawsuit seeks to remedy the massive damage that IRA suffered. IRA looks forward to proving its claims in court.”

Gemini has reportedly rejected the allegations in the lawsuit.

Gemini’s woes

Earlier last week, the CFTC had reportedly sued Gemini Trust Co. for its Bitcoin Futures bid. As reported back then, the regulator has alleged that the exchange presented misleading information during its bid to launch the product.

The exchange was also in news recently for parting ways with 10% of its workforce and the dip in its trade volume numbers.

Amidst the already existing chaos, dealing with IRA’s new lawsuit is set to be quite challenging for the exchange.