IRA Financial Trust Files Lawsuit against Gemini for $36m Crypto Hack

IRA Financial Trust (IRA), a major platform for self-directed retirement and pension accounts, announced on Monday that it has filed a lawsuit against Gemini crypto exchange for its alleged role in the breach of customers’ retirement accounts.

The institution has been providing its customers with exposure to cryptocurrency via integration with the Gemini exchange. In February, $36 million worth of cryptocurrencies – $21 million of Bitcoin and $15 million in Ethereum – were stolen through a hack in Gemini’s custody belonging to IRA’s customers’ retirement accounts.

Customers who lost their funds in the IRA Financial Trust-Gemini financial security breach have been eager to know the whereabouts of their funds.

Since the incident happened, IRA Financial has been working to find solutions for its affected clients. In its lawsuit announced on Monday, the firm alleged that Gemini’s systems were responsible for the hack.

IRA Financial claimed that the Gemini crypto exchange platform did not have proper safeguards in place to protect customer crypto funds. The lawsuit also stated that Gemini failed to freeze accounts within a sufficient timeframe immediately after the incident, allowing the criminals to continue withdrawing funds from customers’ accounts on the Gemini platform after the IRA notified Gemini.

The lawsuit further alleged that Gemini lacked transparency with its cybersecurity protocol and highlighted that the Gemini crypto exchange platform relied on a “faulty” API, which “included a single point of failure.”

Scammers Targeting Personal Investment Apps

Individual retirement accounts (IRAs) are tax-advantaged savings instruments for U.S. workers, who can deduct their contributions from their income. While IRAs don’t allow crypto investments, they normally allow for investments in mutual funds, bonds, and stocks.

That’s how IRA Financial came in and started providing customers with an easy way to make retirement investments in cryptocurrency via its app, which it has linked to Gemini.

The recent financial security breach has triggered anxiety among investors. IRA Financial Trust, a platform offering self-directed retirement accounts with cryptocurrency investments, was hacked on February 8 this year.

 The stolen funds were laundered through a “mixer” service known as a tornado, which helps keep crypto transactions anonymous.

While the hack indeed happened, Gemini distanced itself from the incident. Gemini clarified through its statement that they were not breached, though IRA Financial Trust’s accounts are serviced via the Gemini platform.

Gemini defended itself, stating that it does not manage the security of IRA Financial’s systems. The two security systems are independent of each other.

Both Gemini and IRA Financial are facing a class-action lawsuit from customers impacted by the breach.

The missing funds raise financial security concerns for investors regarding Bitcoin and crypto investments. Investors are urged to take caution against crypto investment scams and avoid fraudsters looking to capitalize on the latest investment trends.

Image source: Shutterstock


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Bitfinex-backed LEO soars to record high on supply crunch expectations

Unus Sed Leo (LEO) surged by almost 70% on Feb. 9 to reach its record highs as traders assessed the potential of an incoming supply crunch in its market.

The token was issued in 2016 to refinance crypto exchange Bitfinex after it lost about $70 million worth of Bitcoin (BTC) in a hacking incident. In its original whitepaper explaining LEO, Bitfinex had promised that if they could recover the lost funds, they would use 80% of the proceeds to buy back and burn LEO.

Around 80% of stolen Bitcoin recovered

On Feb. 8, the U.S. Department of Justice (DOJ) announced that it last week had seized over $3.6 billion worth of Bitcoin stolen — around 94,000 BTC — from Bitfinex in 2016, valued as per the current bitcoin-to-dollar exchange rates. Overall, Bitfinex had lost 119,754 BTC to the hack, meaning the cryptocurrency tied to the incident was worth around $4.5 billion at the time of DOJ’s seizure.

Bitfinex confirmed its promise to use the recovered funds to buy back and burn LEO tokens in a statement issued Tuesday, noting that the process would complete within 18 months of the date it receives the amount.

DOJ officials told the press that they plan to set up a court process for victims to reclaim their stolen Bitcoin funds.

Nonetheless, they did not disclose how long the process would take to finish. If past is any indication, crypto refunds tied to exchange-related hacks take time. For instance, victims of Mt. Gox’s $460-million hack — from 2013 — are still waiting for their refunds.

But LEO bulls ignored such red flags and went ahead with raising their bids for the token this Tuesday, anticipating that the upcoming supply crunch would make the token more valuable in the long run. As it happened, LEO’s price rose to its all-time high of $8.144, only to follow the upside move with a correction that saw the token going to as low as $7.04 early on Wednesday.

LEO/USD daily price chart. Source: TradingView

Mixed outlook for LEO

Adam Cochran, Partner at activist venture capital firm Cinneamhain Ventures, identified problems with the ongoing LEO price rally, noting that not all the recovered funds would go through Bitfinex unless those holdings belong to the exchange themselves.

“There could, of course, be some weird deal structure in place, with the custom tokens Bitfinex issued, where they essentially claim they bought the loss off of other customers and so the Bitcoin is theirs and they can claim it all, and then later distribute,” the executive tweeted Tuesday, adding that he “personally” won’t be purchasing LEO while expecting a quick buyback from Bitfinex.

Related: Bitfinex hack recovery spurs crypto community responses

Conversely, Alexander Mamasidikov, co-founder of crypto wallet service, MinePlex, called the recovery of Bitfinex funds a “right fundamental” that could back LEO’s growth in the future.

“Native to Bitfinex, LEO has the chance of tagging along with the future ecosystem growth of the trading platform, a move that is billed to guarantee the coin’s continuous uptrend,” said, adding:

“LEO is arguably underpriced when compared to the native tokens of its major competitors. In the mid-term, LEO is poised to touch the $10 resistance point while a quarterly close of $12 is likely should this current growth pace be sustained.”

The views and opinions expressed here are solely those of the author and do not necessarily reflect the views of Every investment and trading move involves risk, you should conduct your own research when making a decision.