January 29, 2019 11:50 PM
Investors have finally received some good news nearly a year after the hack came to light.
Francesco Firano, the owner of Italian crypto exchange BitGrail, has been sentenced by a bankruptcy court in Florence, Italy, to repay losses incurred by investors during a hack that saw $170 million worth of Nano tokens (XRB) stolen. The BitGrail Victims Group (BGVG) posted unverified scans of the court documents on Medium along with an explanation of the court’s decision.
BGVG explains that the Italian court ordered both BitGrail and Firano to declare bankruptcy and authorized the seizure of Firano’s personal assets. So far, authorities have seized over $1 million in personal assets from Firano and several million in crypto assets from BitGrail’s exchange accounts.
The bankruptcy proceedings also revealed new folds to the story of the exchange’s hack. Previously, it was believed that BitGrail lost 17 million XRB in February 2018. However, according to the BGVG post, 2.5 million XRB were initially stolen from the exchange in July 2017. In October 2017, another 7.5 million XRB was stolen.
The theft went unreported by Firano until February 2018, when the owner announced that 17 million XRB had been illegally withdrawn. The scanned court documents posted by the BGVG state that, in order to steal the XRB, the thief had exploited a “vulnerability of the Nano software; and the developers acknowledge the software flaws, after initially denying them.”
In April 2018, bankruptcy petitions were filed on behalf of the victims. BGVG explained that Firano argued that the cryptocurrency deposits made on BitGrail were “regular” deposits, meaning that the “customer’s deposit may not be used by the person or company it is deposited with (the depository), such that when the customer asks for the goods back, they are given the same goods they deposited.” Firano asserted that the exchange was a service and he could not freely use the deposited currencies.
The court, however, ruled that the deposits made on BitGrail were “irregular,” meaning that a depository can use the customer’s deposit, making the depository responsible for the return of an equivalent amount back to the customer in the event of a loss. The court document states:
“[T]he cryptocurrencies were stored in ‘hot wallets’ … where they were kept at the disposal of the exchange that managed their withdrawals or the purchases and sales between different cryptocurrencies. These portfolios were exclusively controlled through the exchange code or by those who held the private keys of the wallets (Francesco Firano and his partner Andrea Davoli).”
In other words, BitGrail users did not retain the private keys to the wallets where their funds had been moved by Firano, which led the court to deem the deposits irregular. The BGVG further explained that because Firano had failed to promptly report the stolen XRB to BitGrail users, he was liable for the damages suffered by victims.
While this may bring some relief to victims in the BitGrail hack, Nano’s days in court are hardly over. Earlier this month, the law firms Silver Miller and Levi & Korsinsky filed a class actions lawsuit on behalf of investors against the token company. The suit’s plaintiffs are asking that Nano “rescue fork” the missing XRB by rewriting the token’s code and restoring ownership to the investors.
A similar lawsuit in April 2018 claimed that Nano had violated securities laws, with plaintiffs asking that Nano hard fork its network in order to restore investors’ money. The case, however, was voluntarily dismissed in October 2018.
Nicholas Ruggieri studied English with an emphasis in creative writing at the University of Nevada, Reno. When he’s not quoting Vines at anyone who’s willing to listen, you’ll find him listening to too many podcasts, reading too many books, and crocheting too many sweaters for his dogs, RT and Peterman.
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