Italian Court Orders BitGrail Owner to Pay Back As Much As Possible

An Italian court has ruled that the now defunct BitGrail exchange and its majority shareholder Francesco Firano are declared bankrupt, and that their assets should be seized in order to repay disposed customers. The BitGrail Victims’ Group has called the ruling “both a huge win for crypto users” and “a cautionary tale for cryptocurrency exchange owners.”

In January of 2018, about 17 million Nano (NANO) tokens - at the time called RaiBlocks - were found to be inaccessible to exchange users. These tokens at time of writing are worth about $14 million at current market price, but in January when the loss occured, the same tokens would have been worth up to $595 million.

Despite to this day not knowing exactly why the tokens went missing, the Italian court adjudged that it was the ultimate responsibility of Firano that things went smoothly - and thus, he is being held responsible and will be required to pay back as much as he can.

There are four possibilities as to why the RaiBlocks tokens went missing:

The first - as Firano alleges - is that a critical bug in the cryptocurrency allowed malicious users to illegally withdraw more tokens than they held on the exchange; second, that the BitGrail exchange itself had an exploitable bug which allowed malicious theft; the third that the exchange was - in a more “traditional” sense - hacked and that the tokens were stolen; and finally, that the whole operation was simply an exit scam and that Firano absconded with the RaiBlocks tokens.

‘Not your keys, not your [crypto]’

There exists evidence to support all of these claims - including a code bug, exchange bug, hack, and scam.

But it seems that in the eyes of the Florence bankruptcy court, none of that matters. In their opinion Firano was responsible for accounting for all possibilities of bugs with the software, and making exchange functions “idempotent.” Idempotency roughly means that a command should execute a function the same way every time, and only once - in this case, the command and function of withdrawing a digital asset.

The court wrote:

As cryptocurrencies are fungible assets, after the users’ cryptocurrencies were transferred to the main BitGrail address [...] no information was available in relation to their owners. This means that the deposit was an irregular deposit, and that the custodian was obliged to make available to the holders the full quantity originally deposited, with a 100% cash ratio.

CryptoGlobe recently reported on a different lawsuit in the US against the Nano developers themselves, but still in connection with the BitGrail loss.

This lawsuit was conducted on the grounds RaiBlocks had been an unauthorized security - a completely different vector of legal complaint - and that the blockchain should be hardforked (or “rescue forked”) to recoup burned users’ funds.