Korean Coinnest exchange scrambling to recover $5.3 million mistake


Have you ever woken up in a cold sweat in the early morning hours, suddenly thinking that you had sold your bitcoin for $35 instead of $3,500? Did you rush to your computer to check to see if the order had been entered correctly? Some poor fellow or woman in South Korea is living a nightmare that is even worse than this hypothetical example of woe. It seems that Coinnest, a crypto exchange based in South Korea, inadvertently sent out $5.3 million worth of bitcoin (BTC), instead of a nondescript airdrop of “We Game Tokens” (WGT).

Perhaps, something was lost in the translation or the call signs for the two tokens look similar or require similar keystrokes in Korea, but in any event, the exchange is scrambling to correct its catastrophic blunder. If the craziness stopped there, we could be more forgiving, but whoever was manning the input devices also sent an undisclosed amount of Korean Won to the exchange’s customers, as well.

From a cultural perspective, one might expect that loyal customers would have contacted the exchange immediately and refunded the obvious transfer error, but no, it was like “manna from heaven”. Customers woke up to see unbelievable balances, and quickly thought the gods had favored them. They sold so quickly that their actions caused a “flash crash” of sorts on other exchanges, as they attempted to transfer and sell bitcoin. On some platforms, the BTC price fell to $50, if that can be believed.

All kidding aside, problems like these are real and significant. Coinnest has been pleading with customers to return the funds. At last report, the offending server has been fixed, if it really was a server issue, but on a good note, half of the funds have been returned. Servers were shutdown when an avalanche of withdrawal and transfer requests hit them. After a few tense hours, servers were back online.

Traders and other investors were at a disadvantage and affected by the outage, but the company was abrupt in its response:

There are currently no plans to compensate members for transactions caused by computer errors. There are members claiming to have lost opportunity costs due to a 9-hour server check. It is difficult to compensate the damage as realistic as it seems.

Press reports were quick to mention that Coinnest had been in the news for other fiascos in the past. Kim Ik-hwan, a former CEO of the exchange, along with three other executives, had been accused of embezzling funds from its members, reported to be in the millions of dollars. Although arrested, Kim Ik-hwan was released later after questioning, and there has been very little follow-up news on this case.

For the time being, Coinnest is mired in controversy once again and is going about its business, trying to recover what it can from this misguided airdrop. An “airdrop” is a term held over from early credit card days when banks gave out cards freely in mass in hopes of stimulating action in the marketplace. Coinnest has definitely stimulated action, but not the kind that it expected.

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