According to a California federal judge, a cryptocurrency enthusiast who used a bug in the ICON network to generate a large amount of the network’s native ICX token can file entitlement claims.
U.S. District Judge William H. Orrick stated on Monday, Aug. 9, that the case raises novel questions about the digital property. He went on to say that plaintiff Mark Shin had sufficiently alleged that the ICON Foundation was wrong to freeze his crypto asset accounts after he exploited its flawed code.
According to Law360, the allegations were sufficient to allow the case to proceed, with Judge Orrick dismissing the majority of the ICON Foundation’s motion to dismiss the claims.
Shin discovered a bug in the ICON Network’s code after a software update in August 2020, according to court filings. Shin discovered 25,000 new native ICX tokens in his wallet while attempting to transfer staked tokens.
He assumed there was a “visual bug with the wallet software” and repeated the process, resulting in the generation of another 25,000 ICX tokens.
Shin was able to create 14 million new ICX tokens worth approximately $7.8 million as a result of the code flaw. He then transferred many of those tokens to the cryptocurrency exchanges Kraken and Binance.
According to the court order, Shin acknowledged that “the authors and developers of the [software update] may not have intended for the network proposal to behave as it did,” but argued that since the code changes were implemented, he was the new lawful owner of the tokens.
He claimed that ICON disagreed and requested that his accounts be frozen on Binance and Kraken, claiming that he had attacked the network. The judge granted the plaintiff’s claims of potential token ownership rights, allowing the case to proceed, stating:
“At this point, the question is whether Shin has a plausible claim to a possessory interest in the ICX tokens. I discovered that he has.”
Shin’s attorney, Ted Normand of Roche Freedman, added that the case calls into question some networks’ claims of decentralization:
“You can’t have a decentralized ecosystem only when it’s convenient if you’re a DeFi company issuing assets.”
As the price of ICX tokens has fallen, the South Korean blockchain project has fallen from its previous lofty positions in the market capitalization charts, and it has largely missed out on this bull market. Today, ICX is trading at $1.12, down 91.5 percent from its all-time high of slightly more than $13 in January 2018.