[Exclusive] Preview of Court's Stance on Bithumb's Erroneous Bitcoin Payout: "Return the Unjust Enrichment" (Comprehensive)

Erroneous Payment of Tether Worth 20.2 Billion Won
Gwangjang Wins Case Representing Bybit
Legitimacy of Exchange Self-Help Measures Recognized

In a case involving an erroneous coin payment worth approximately 20.2 billion won by Bybit, the world's second-largest cryptocurrency exchange, a Korean court has handed down the first ruling recognizing the recipient's obligation to return unjust enrichment when they refuse to return wrongly deposited coins.

As attention focuses on what legal liability will be borne by winners of the recent Bithumb "random box" event who disposed of erroneously paid Bitcoin on February 6 by cashing it out or using it to purchase other coins, this ruling, which involves a nearly identical structure, is expected to serve as a precedent.

Image of the virtual asset Tether. Reuters/Yonhap News file photo. Illustration. Yonhap News

According to the legal community on the 13th, the 11th Civil Division of the Seoul Northern District Court ruled the previous day in Bybit's unjust enrichment lawsuit against a woman surnamed Han and her husband, a man surnamed Lee, that "Defendant Han shall deliver to Bybit the 1,739,236 Tether (USDT) that have not been recovered," partially ruling in favor of the plaintiff.

The court dismissed Bybit's claim seeking joint liability from Lee, who did not directly receive the miscredited coins, but fully accepted the claim against Han.

The court added, "If compulsory enforcement is impossible, she shall pay 2,549,719,976 won, which is the value as of the closing date of the arguments." In consideration of the price volatility of cryptocurrencies, the court set the point in time for calculating the amount of unjust enrichment that Han must return as the closing date of the arguments.

On the same day, the court ruled against the plaintiff in a countersuit filed by Han, in which she sought damages from Bybit, claiming that the account restrictions and related measures were unlawful.

Bybit, which has been paying commissions in cryptocurrency to its affiliate partners based on their promotional performance, due to a system error on August 25, 2023, paid Han 15,303,313 Tether as an affiliate commission, an amount far exceeding the usual payments. Based on market prices at the time, this was equivalent to about 20.2 billion won.

Immediately after the coins were miscredited, Han transferred most of them to her regular account and then exchanged them for other cryptocurrencies such as Ripple (XRP) and withdrew them.

Bybit immediately restricted Han's account and recovered part of the assets, but it was unable to recover 1,739,236 Tether. In June 2024, it filed an unjust enrichment lawsuit against Han, who refused to return them. In July last year, Han filed a countersuit against Bybit, arguing that Bybit's restriction of her account and recovery of remaining assets violated the Act on the Regulation of Terms and Conditions and were therefore invalid.

Law firm Gwangjang, which represented Bybit in the lawsuit, analyzed the usual size and pattern of commissions that Bybit had paid to affiliate partners using electronic records during the trial, and closely questioned the details of Han's withdrawals and exchanges. Through this, it highlighted that the assets paid to Han clearly constituted unjust enrichment "without legal cause."

Bybit also argued that the account restrictions and asset recovery measures taken under its terms and conditions were essential self-help measures to maintain order in cryptocurrency trading and did not violate the Act on the Regulation of Terms and Conditions.

The court accepted all of Bybit's arguments and ruled in its favor. During the proceedings, the court is known to have indicated that, once it was established that the transfer was made by mistake, the burden was on Han to prove that the assets did not constitute unjust enrichment.

Attorney Jung Youcheol of Gwangjang, who represented Bybit in this case, stated, "This ruling is the first to clearly recognize, in matters of mistaken transfers that frequently arise at cryptocurrency exchanges, the recipient's civil obligation to return unjust enrichment, and to fully affirm the legality of account restrictions and asset recovery measures taken by exchanges based on their terms and conditions."

This ruling is expected to affect the structurally similar Bithumb erroneous payment case, in that, after the Supreme Court in 2021 denied the applicability of embezzlement or breach of trust charges to the disposal of erroneously paid cryptocurrency, it became difficult to criminally punish users who disposed of such assets, and now the court has recognized a strict civil obligation to return unjust enrichment.

The ruling is also significant in that it confirms the legal legitimacy of emergency measures such as restricting users' accounts that exchanges take under their terms and conditions in the event of system errors, and, taking into account the high price volatility of cryptocurrencies, clearly presents a standard for calculating the converted amount when delivery of the original cryptocurrency is impossible.