Bithumb Loses Again in Second Trial Over 'Integrated Exchange System Development' Lawsuit with SMEs

Court: "Company A invested costs and efforts trusting Bithumb Korea"
..."Bithumb Korea violated duty of good faith, must pay over 800 million won"
Bithumb and Company A both appeal: "We will seek Supreme Court ruling"

South Korea's second-largest virtual asset exchange Bithumb has lost in both the first and second trials in a civil lawsuit against a domestic small and medium-sized enterprise over the development of an 'integrated exchange system.'

According to the legal community on the 10th, the Seoul High Court Civil Division 4 (Presiding Judges Lee Won-beom, Lee Hee-jun, Kim Kwang-nam) recently upheld the first trial ruling in an appeal lawsuit filed by software development company A against Bithumb Korea, claiming damages of about 1.4 billion KRW, ordering "Bithumb Korea to pay over 800 million KRW" in favor of company A. The appeal of Bithumb Korea's counterclaim demanding about 1.9 billion KRW from company A was also dismissed.

Previously, Bithumb Korea and company A signed a contract in 2017 stating that "company A will supply, maintain, and service a new trading system." At that time, company A proposed "to build an 'integrated exchange service' using the delivered program," and the two companies made an additional 'ancillary agreement.' If company A developed and supplied the integrated service model at its own cost, Bithumb agreed to provide, free of charge, ▲membership status ▲some infrastructure as compensation.

The conflict began when the agreed terms were not upheld by both companies. Company A requested "to share integrated system resources" and "to confirm the opening schedule of the integrated exchange," but Bithumb Korea did not accept these requests. Even when Bithumb Korea submitted an application related to the integrated exchange project to the local government promoting the establishment of a blockchain regulatory free zone, company A was excluded.

In 2020, company A filed a damage claim stating, "Bithumb Korea, which received the system delivery, did not keep its promises and unfairly used trade secrets." Bithumb Korea filed a counterclaim, arguing, "Company A's integrated system was of a low standard for practical use, and a proper system was not provided by the initially agreed time."

The first trial ruled, "Bithumb Korea must pay company A 872 million KRW plus delayed interest." At that time, the court said, "Company A invested significant costs and efforts to develop the integrated system, believing the ancillary agreement would be fulfilled," and "Bithumb Korea's contradictory attitude led to an unacceptable outcome in terms of justice, which constitutes a breach of good faith."

Furthermore, the court pointed out, "Company A repeatedly inquired about the schedule, but Bithumb Korea continuously postponed the start date of the integrated exchange operation without valid reasons," and "Bithumb Korea appears to have substantially utilized the structure of the integrated system proposed by company A when submitting the demand survey to the local government. However, company A was neither included as a participating company nor informed of related matters." However, the court limited the compensation responsibility, stating, "It is difficult to consider that Bithumb illegally owns the integrated system, etc."

All of Bithumb's claims and counterclaims were dismissed. The first trial court emphasized, "There is insufficient evidence to acknowledge that the performance of the integrated system created by company A was inadequate. Above all, there is no material showing that Bithumb Korea urged delivery or requested performance improvements," and "Company A's system was delivered within the schedule agreed upon by both companies."

Both Bithumb, dissatisfied with the dismissal of its claims, and company A, dissatisfied with the recognized compensation, appealed, but the second trial also upheld the first trial's judgment. Both companies have filed petitions for appeal, and this case is expected to be reviewed by the Supreme Court.