Victims complain they were not paid

Victims of the $ 200 million BitMart hack say it has been five weeks since the crypto exchange promised to return their money, but many still haven’t seen a dime.

“I’m not the type to bitch and moan a lot,” said Paul DeLong, a business owner in Austin. “BitMart, from a communication point of view, they said they were going to give us more updates. We haven’t received any updates at all.”

DeLong says he has contacted the exchange on several occasions, and each time he received a standardized response from a bot to inform him that BitMart and their attorneys are “working on” it.

In early December, BitMart wrote in an official statement that it would use its own money to reimburse victims of the large-scale security breach, which the exchange blamed on a stolen private key.

But users are restless as they wait for BitMart to keep its promise.

CNBC spoke to several BitMart users who were the target of the attack, some of whom risk total financial ruin if their funds are not recovered.

“Whether it’s $ 20, $ 500, $ 10,000, it doesn’t matter, just let us know and let us know,” DeLong said.

Many victims have lost a particular token called safemoon, which is a cryptocurrency token built on the Binance Smart Chain blockchain. The play skyrocketed in the second quarter of 2021 after a slew of celebrity backing including rapper Lil Yachty and YouTuber Jake Paul.

CNBC asked if BitMart still plans to keep its promise to reimburse victims. The email address of BitMart CEO Sheldon Xia which he lists on his unverified Twitter profile, rebounded, just like when CNBC first contacted Xia in early December.

A spokesperson responded: “We will take care of all user withdrawals. We are also in discussions with several project teams to confirm the most reasonable solutions such as token swaps. Any further updates will be announced on our website. official site.” The company did not respond to more detailed questions.

Victims plead for transparency

CNBC has spoken to more than a dozen BitMart users personally affected by the breach. A common theme in many of these conversations was the desire for transparency. The shared feeling was that bad news was better than no news.

A BitMart user, who said he felt his tokens were “held hostage,” sent CNBC a screenshot of his interaction with the administrator who manages BitMart’s Telegram account. When he asked Thursday night if there was any further guidance on when he would receive his Security Moon Tokens, the response was, “We’ll announce when there’s an update.”

Mohamad, based in Toronto, who asked CNBC to refer to him by his first name, said he felt he was about to kill himself because of his experience with BitMart.

The Iranian refugee has $ 53,000 of security moon token stored in his BitMart wallet, of which $ 40,000 was from a loan he has to repay with 4% interest.

The 38-year-old told CNBC that from 7 a.m. to 10 p.m., seven days a week, he worked as a tow truck driver for a roadside assistance company. He says he has to work long hours because his employer pays him a commission per task rather than an hourly wage. He gets $ 20 per job, but he has to pay for his own diesel fuel.

He started investing in cryptocurrencies in an attempt to forge a future in Canada.

“I just thought I could grow my money, then I could go to school to learn English and go to college,” Mohamad told CNBC. “I have no savings.”

Another BitMart user told CNBC that it was not just his money at stake. His mother and mother-in-law pooled $ 30,000 and asked him to invest the money in BitMart in their name.

“After I set it up, the creepy hack happened, so I was going crazy, because I had nothing to give them,” he said.

New York-based “Mr. Blik,” who also asked not to use his real name, told CNBC the timing couldn’t have been worse.

“It happened near the holidays … People sometimes have to liquidate some of their positions to cover their expenses, to buy things for the kids for Christmas. Their inability to make people whole has really created an environment where this freedom that we are all looking for was taken away from us, ”Mr. Blik said.

A Kansas-based crypto investor, who has around $ 35,000 stuck in BitMart, told CNBC he wasn’t very worried until recently.

“There was some general understanding, if not patience, on the part of holders that BitMart was simply waiting after the first of the year to redeem the stolen hot wallet tokens for tax reasons,” he said.

That same BitMart client now says he’s in contact with around 6,800 holders who are considering filing a class action lawsuit against the exchange. They give it about a week until they take action.

Beware of the Safemoon Army

The vagueness of the company helped spark the so-called “Army of the Moon” – a term given to the community of security moon token holders, who have historically proven to be a formidable force when they came together. unite around a cause.

BitMart hackers stole a mix of over 45 coins, but Security Moon Tokens were a significant chunk of the loot. While some BitMart users have reported refunds for tokens like saitama, safemoon holders remain in limbo.

Safemoon investors using BitMart also say they have not received their “reflection” payments – a dividend-like benefit distributed to existing token holders – since November. BitMart’s security moon investors therefore feel doubly burned.

Even holders of a Safety Moon who have never used BitMart feel they have been indirectly burned by the breach.

A US Air Force veteran pointed out that when the hacker stole the security moon pieces and sold them all on the open market, he lowered the price of the entire project. “We are all affected by this,” he said.

Safemoon’s army is pressuring BitMart through a Twitter campaign designed to shame the exchange from continuing to reimburse victims of the hack. The safemoon contingent is pushing the Twitter hashtag #WenBitMart, which started trending Monday night.

Although BitMart has told CNBC it will support token exchanges, victims say it could cost them money.

One person said that if he liquidated his tokens on BitMart in USDT (a popular stablecoin pegged to the value of the US dollar), he would do so at a market position that was one-third of where his moon tokens were. security are being traded today. He would also face a 10% fee to complete the transaction due to Safemoon’s business requirements. (This 10% transaction tax provides an incentive for users to continue to own the token, which helps put a floor below its price. They also fund the dividends that token makers pay to holders as an added incentive.)

Even if BitMart fixes and reimburses everyone, it remains to be seen whether the exchange will buy back the lost equivalent assets at their current prices, which in some cases could be considerably higher..

Safemoon’s Global Product Manager is himself a BitMart customer. Ryan Arriaga says 15% of his Safety Moon Pool is on BitMart. But he thinks the exchange will do the right thing.

“It’s not like four or five years ago, where a lot of those people involved are anonymous … People know the space, they understand it better, they can read the contracts better,” Arriaga said.

“We’ve come such a long way now that I think BitMart will keep its promise and do the right thing … Especially with the Security Moon Army, we have so much support for what we’re trying to do. realizing that he would not die. It will not only add more fuel to the fire. “

Users dig deeper

While BitMart customers wait for answers, some wait for the moment as they delve deeper into the crypto exchange itself. CNBC participated in a chat on Twitter Spaces on Wednesday evening in which nearly 700 people discussed the situation.

BitMart closed a $ 13.7 million Series B funding round at the end of 2021 at a valuation of $ 300 million, which has given some pause for thought to how the exchange is equipped to self-fund repayments of $ 200 millions of dollars to customers.

Others have asked why BitMart doesn’t go through insurance to reimburse stolen funds. CNBC asked BitMart this question and the exchange declined to answer.

CNBC also asked if the exchange was doing an internal audit to assess if something was wrong within its own ranks, and again, BitMart chose not to answer that question.

The December hack affected two of BitMart’s “hot wallets”, but other assets were apparently “safe and unharmed.”

Cryptocurrency can be stored ‘hot’, ‘cold’, or a combination of both. A hot wallet is connected to the internet and allows owners to access their coins relatively easily so that they can access and spend their crypto. The trade-off for convenience is potential exposure to bad actors.

The final and resounding concern of many BitMart users is that instead of stopping trading of affected and unsecured tokens, BitMart has only stopped withdrawals. CNBC saw a video in which a person bought security moon tokens on the exchange on January 5, well after the hack.

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