Lawsuit Over Bug-Issued ICX Token Bonanza Can Go Forward, Judge Rules
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Lawsuit Over Bug-Issued ICX Token Bonanza Can Go Forward, Judge Rules

1 year ago

A California federal judge said an ICON Network staker can pursue a claim demanding the return of $7.8 million worth of ICX tokens obtained via a coding flaw.

Lawsuit Over Bug-Issued ICX Token Bonanza Can Go Forward, Judge Rules

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An ICON Network staker can go ahead with a lawsuit demanding the return of 14 million ICX tokens he obtained after discovering a bug in the decentralized finance aggregator blockchain.

Federal District Judge William Orrick of the Northern District of California shot down ICON’s attempt to dismiss the lawsuit in an August 9 order, finding that plaintiff Mark Shin has a “plausible claim.”
The judge found that the case “raises novel questions about digital property,” according to Law360. “The case addresses property rights concerning blockchain and decentralized technology, a relatively fresh legal frontier.”

In August 2020, Shin discovered that an update to the decentralized protocol added 25,000 ICX tokens to his account when he transferred his staked tokens from a one network node public representative (P-Rep) to another. He did this repeatedly, amassing a cache of ICX tokens. 

When the ICON Foundation discovered the bug, it convinced Binance and Kraken to freeze Shin’s accounts. He promptly sued, saying that while he acknowledged that “[t]he authors and developers of the Revision 9 Proposal may not have intended for the network proposal to behave as it did… this was the proposal that the P-Reps had agreed to and did adopt into the network.”

That, Shin added, makes him “lawful owner of the ~14 million ICX tokens rewarded to him on August 22, 2020.”

While those tokens were worth as much as $11 million at the time of their creation, they were worth nearly $17 million on the day the judge ruled.

Misconduct Or Scapegoating?

Shin also accused ICON of making false allegations that he “was a ‘malicious attacker' who acquired ‘stolen' funds.” 

An earlier version of the lawsuit was tossed, and Shin removed several allegations, including defamation.

But, Judge Orrick noted, Shin also added allegations that “ICON publicly targeted him as a ‘scapegoat to distract from its culpability in introducing the Revision 9 minting bug’ and at the same time sought to cover up the fact that many of its close affiliates received ICX tokens from the same mechanism as Shin.’”

Among these were Velic, StakingTeam, ICX Station, and Hyperconnect, said Shin’s legal team.

Judge Orrick said Shin added that the ICON Foundation has de facto control of the network, and used a new update, Revision 10, which “effectively ‘locked’ Shin out of his ICX wallet.” 

The argument, Judge Orrick said, boils down to whether Shin had a legal right to the tokens or not. ICON says he did not, and was therefore not harmed by Revision 10.

“The inquiry at this stage, however, is whether Shin has plausibly alleged possessory interest in the ICX tokens. I find that he has,” Judge Orrick ruled. “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.”

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