Bitgrail in the grey: Hacker or Scam?
With business halted after an alleged hacking attack, Bitgrail has attempted to bounce back from the controversial shutdown, but without success. Meanwhile, cryptocurrency investors lay in wait to recuperate millions of dollars in missing funds.
When Bitgrail, the cryptocurrency exchange founded in Italy, ceased operations in February as a consequence of a hacking attack, those with investments in the company were left with fear for the future of their stakes. On May 2nd, despite the bankruptcy proceedings in progress, Bitgrail attempted to resume business but was immediately blockaded by order of the Court of Florence.
In early February of this year the global cryptocurrency exchange Bitgrail ceased operations of the global trading portal after an alleged cyber attack.
Founder Francesco Firano claims the hack resulted in a theft of 17 million Nanos (XRB), a value of approximately 150 million euros at the time. Firano subsequently approached Nano developers, asking them to modify their accounts ledger in order to cover the losses of the hack.
Nano promptly declined the request and alerted authorities of the theft.
Controversy resulted, and questions of responsibility for the attack were raised; was the hack possible due to a vulnerability in Bitgrail’s security, or a weakness in Nano’s blockchain?
Nano’s response to the controversy was to absolve itself of wrongdoing by publishing communications between Firano and nano developers, along with commenting on the ordeal saying that they had reason to believe that Firano was deliberately “misleading the Nano Core Team and the community regarding the solvency of the BitGrail exchange for a significant period of time”.
Furthermore, the Nano Foundation highlighted several questionable occurrences in Bitgrail’s operations:
- Versions of the amount of funds stolen altered several times since the attack.
- Bitgrail customers reported difficulties in withdrawing their funds prior to the hack, this being due to withdrawal limits being lowered by Bitgrail in the weeks leading up to the attack.
- Failure to notify the Nano Foundation of an operational flaw which allowed Bitgrail customers to withdraw more nano currency than they had invested – a glitch which Bitgrail was aware of since October 2017 but had not alerted Nano to until February.
In further response, Nano announced the creation of a legal fund which will provide any victim of the Bitgrail hacking support in pursuit of legal representation. Alongside the hacking investigations, the possibility of an internal compromise is being considered.
In March, Firano announced that Bitgrail would reimburse investors of their stolen Nano, initially refunding 20% of their losses and promising the return of the remaining 80% sometime in the future.
However, acceptance of this repayment process would mean investors need to sign a contract that prevents them from taking any future legal action against Bitgrail.
The company attests that this is the only possible option for repayment, as legal proceedings have already begun against the portal and thus further legal actions against them would delay/prohibit the repayment of stolen funds. This is an unsatisfactory option for most victim investors.
The Nano Foundation
Boccadutri international law firm will continue to follow and update upon this case.
The firm currently assists customers who have been the victim of the events aforementioned. For more information and advice, contact our expert lawyers.