On April 9, 438 BTC, worth Rs. 28 crores today were stolen/siphoned out from an Indian exchange Coinsecure. Besides a few updates, the company has been silent about much of the developments in the case. Until now. The CEO, Mohit Kalra has finally started communicating with the users. Mohit answered questions about compensation, the leads in the case and the reason for silence for this long.
On May 5, Mohit Kalra, the CEO of Coinsecure cryptocurrency joined the official telegram group of the exchange and began answering queries. He apologised for not being able to join early as he was busy with the authorities. Here are all the details of the encounter.
Note: All answers are transcribed to share the gist of it from multiple messages.
Question: When will the funds be returned to user?
Answer: Coinsecure has been advised by lawyers to not compensate users, as the terms and conditions stated that the exchange is not liable for the funds. However, Kalra has decided to compensate the users to “maintain the good will of coinsecure”. Kalra will not be using investor funds to compensate customers, but he is “acquiring a huge personal loan to compensate users”.
Coinsecure had earlier decided to return 10% value of BTC and the rest in INR for the customers, however that is not possible anymore. Income Tax department has been involved in the case and since Bitcoin is not a legal tender, a refund cannot be issued in it. So expect refund in INR.
The planned conversion of BTC to INR is set to Rs. 450000/-, the price on the day of the hack April 9.
The CEO is right about not being liable for user funds. All exchanges have a clause about that. In an event of theft, the exchange is not liable for your loss. This is just like when you use a valet service at a hotel but then you read a warning “Hotel is not liable for your vehicle”. It is Bullshit but that saves the hotels from paying you a compensation. You can open the terms of any exchange and look for the word ‘Theft’, you will know.
In this scenario, I know it feels harsh as a user to have lost your funds, but if you aren’t happy with the compensation, you need to battle it out in court.
Question: What are the Next Steps to receive compensation?
Answer: A Basic website will go live where users can log in and see their balances in INR. Users need to download a form, fill it and courier it to Coinsecure with attested KYC proofs. Then the funds will be dispersed.
Question: Did they catch the culprit?
Answer: Although the answer to that question is no, Kalra hinted that the CSO Amitabh Saxena, the prime suspect is in custody and is being questioned along with the rest of the team. No other details were revealed besides that a lot of Indian and international agencies are involved in this case.
Question: Where is the investigation at?
Answer: The investigation details cannot be leaked yet. But the files will be made public once it is over.
Question: Did the CSO Amitabh Saxena do it?
Answer: He is a suspect because a day before the hack the CSO transferred 90% the BTC to the hot wallet and later claimed it was hacked. He either made a mistake or it was intentional. It was suspected to be intentional. Currently he is being questioned and all company property and personal devices have been seized by authorities.
Question: BTC price is rising and users are losing money?
Answer: Kalra acknowledged the sentiment but revealed that he had no permission for fund disbursal earlier. The exchange rate is fixed to Rs. 450000.
We will be concurring this opinion. During an investigation the government agencies would not have allowed for disbursal. Additionally this needs to be done with proper legal channels. Setting them up will take time too. Once again, it feels unfair to be dealt the losing hand, but the only way to get more value is via a lawyer, by taking this to civil court. It is not guaranteed as the terms and conditions will take precedence.
Question: Will Coinsecure seize to exist?
Answer: Coinsecure will launch again stronger according to Mohit Kalra and he hopes for everyone’s support.
Coinsecure will be relaunching in India and in Venezuela as we reported earlier.
Most of the conversation went back and forth as people asked for a refund on today’s value of BTC and Kalra kept on asking for understanding from the users.
Some bizarre suggestions included that users should be paid in INR but at the purchase value (obviously these are the users who bought it at the higher price) as well.
Time and again many people have been warned to not keep the money in exchanges, we are learning the hard way. Exchanges are centralised system prone to an attack. If you plan on investing the money, it is better to move your holdings to a private wallet, preferably a hardware wallet.
Many people in the conversation mentioned they bought Bitcoin at 10 or 12 lacs, we recommend if you are still keeping the BTC in exchanges and waiting for the price to rise, please move them to a private wallet.
I think the bigger problem here is the liability. How can an exchange not be held liable for our funds? Yes, they mentioned it in their terms and conditions, but it is unfair to us. We should avoid trading on such exchanges but alas, there aren’t any centralised exchanges that do not have this clause.
Keeping that in mind, I believe that Kalra is doing good by the users by refunding the amount. Many will argue, instead of taking a personal loan, he needs to pitch the idea to the investors and ask for their support.
What will happen then? If they say yes. Great. Coinsecure can bounce back big. If they say no, Kalra will have to take a personal loan and fund it or use burn whatever investor money he has in the bank and forget about relaunching.
Instead, what he is doing is keeping all interests in mind.
Investors may have lost confidence but coinsecure has a funded bankroll to relaunch. They can prove their might in future. Users will have lost confidence but things sway in any exchange’s favour if the incentives and market conditions are right. You just have to sit tight and be patient. So I personally think, by not using investor funds and paying the customers the compensation is a good idea.
And as a customer who thinks they lost their money, think again guys, if on April 10th Coinsecure refunded the money, you’d have the exact INR value of your BTC. But that’s wishful thinking. Why? Because the authorities won’t let them. Funds and property are first thing to be seized in a case of a hack or theft of such value.
It is a bad situation but there probably is no other way.
What is your opinion on Coinsecure’s decision? Let us know in the comments below