A cryptocurrency enthusiast who exploited a bug in the ICON network that allowed him to mint a large amount of its native ICX token can pursue entitlement claims, according to a California federal judge.
On Monday, United States District Judge William H. Orrick said that the case raises novel questions about digital property. He added that plaintiff Mark Shin had adequately alleged that the ICON Foundation was wrong to freeze his crypto asset accounts after he took advantage of its flawed code.
According to Law360, the allegations were enough to allow the case to go forward, with Judge Orrick denying the bulk of ICON Foundation's motion to dismiss the claims.
According to court filings, Shin discovered a bug in the ICON Network's code after a software update in August 2020. When attempting to transfer staked tokens, Shin discovered that 25,000 new native ICX tokens had appeared in his wallet.
He thought that there was a “visual bug with the wallet software” and attempted the process again whereby another 25,000 ICX tokens were generated.
The code flaw allowed Shin to create a total of 14 million new ICX tokens worth around $7.8 million at the time. Many of those tokens he then transferred to the Kraken and Binance cryptocurrency exchanges.
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 he was the new lawful owner of the tokens since the code changes had been adopted.
He claimed that ICON disagreed and asked Binance and Kraken to have his accounts frozen, saying that he had attacked the network. The judge agreed with the plaintiff’s claims of possible token ownership rights allowing the case to proceed, stating:
“The inquiry at this stage, however, is whether Shin has plausibly alleged possessory interest in the ICX tokens. I find that he has.”
Ted Normand of Roche Freedman who is representing Shin added that the case raises questions over decentralization claims that some networks make:
“If you're a DeFi company issuing assets... you can't have a decentralized ecosystem only when it's convenient.”
The South Korean blockchain project has fallen from its previous lofty positions in the market capitalization charts as ICX tokens have tumbled in price and largely missed out on this bull market. Today, ICX trades at $1.12, down 91.5% from its January 2018 all-time high of a little over $13.