Court Rules Upbit Must Compensate LUNC Investor Over Pre-Crash Transaction

In a landmark decision, a South Korean court has ordered Dumamu, the operator of the crypto exchange Upbit, to compensate a customer for delaying a LUNC transfer just before the Terra ecosystem crash. The ruling marks a significant moment in the cryptocurrency world, highlighting the importance of timely transactions and the responsibilities of crypto exchanges. The court’s decision has set a precedent that could influence future cases involving delayed transactions and investor losses.

The Legal Battle and Its Implications

The legal battle began when a Vietnamese investor in his 50s filed a lawsuit against Upbit in September 2022. The investor had attempted to transfer 1,310 LUNC from his Upbit wallet to a Binance wallet on March 24, 2022. However, due to a transfer problem, the coins were sent back to Upbit, and the investor was unable to retrieve them. The court heard that the delay was caused by the investor’s failure to enter the correct wallet address details.

Despite the investor’s repeated requests to return the coins, Upbit cited new anti-money laundering (AML) rules as the reason for the delay. The court found that Upbit’s failure to return the coins in a timely manner resulted in significant financial loss for the investor. The value of the LUNC coins plummeted by 99.9% during the Terra ecosystem crash in May 2022, effectively reducing the investor’s holdings to zero.

The court’s ruling in favor of the investor underscores the importance of exchanges adhering to timely transaction protocols. It also highlights the potential financial risks investors face when exchanges fail to act promptly. This decision may prompt other investors who have experienced similar issues to seek legal recourse.

Upbit’s Response and Future Actions

Upbit has the legal right to appeal the court’s decision at the High Court. The exchange has stated that it will review the ruling and consider its options. Upbit’s response to the ruling will be closely watched by the crypto community, as it could set a precedent for how exchanges handle delayed transactions in the future.

The court ordered Upbit to pay the investor approximately 147 million won (around $107,000) in compensation, along with late payment interest. This ruling serves as a reminder to exchanges of their responsibilities to their customers and the potential legal consequences of failing to meet those responsibilities.

Upbit’s adherence to AML protocols was a key factor in the delay, but the court found that the exchange’s actions were not justified given the financial loss incurred by the investor. This case highlights the need for exchanges to balance regulatory compliance with the timely execution of transactions to protect investors’ interests.

The Impact on the Crypto Market

The court’s decision has significant implications for the broader cryptocurrency market. It reinforces the need for exchanges to prioritize timely transactions and investor protection. The ruling may also lead to increased scrutiny of exchanges’ transaction protocols and their adherence to regulatory requirements.

Investors may feel more confident in seeking legal recourse if they experience similar issues with delayed transactions. This could lead to a wave of lawsuits against exchanges that fail to act promptly, potentially resulting in significant financial liabilities for those exchanges.

The ruling also serves as a wake-up call for exchanges to review and improve their transaction protocols. Ensuring timely transactions and adhering to regulatory requirements will be crucial in maintaining investor trust and avoiding legal challenges. The crypto market will be watching closely to see how Upbit and other exchanges respond to this landmark decision.