Will Bitfinex’s “Loss Socialization” Hold Up in Court?
Is Bitfinex’s loss socialization decision legally viable? Cornell University Professor Emin Gn Sirer doesn’t seem to think so.
The online cryptocurrency exchange experienced a hack earlier this month, resulting in a large-scale theft, causing the price of Bitcoin to drop to about $530 USD over the course of the day. In response to the loss of about $70 million worth of Bitcoin, Bitfinex has decided to socialize the loss by distributing it amongst their customer base, causing them to each lose 36% of their cryptocurrency holdings in the company.
However, that decision may not hold up. According to Sirer, who is a co-founder at IC3 (Initiative for Cryptocurrencies and Contracts), spreading the company’s losses among customers may cause legal complications:
This post was published at Coin Telegraph on 2016-08-08.