Yulchon Defends Bithumb Delisting in Fake-Coin Injunction Case

Winning Strategy

Firm represented Bithumb in delisting dispute

Court rejects token issuer’s injunction request

Structural blockchain security flaws proved quickly

Yulchon LLC, a South Korean law firm, successfully defended cryptocurrency exchange Bithumb in an injunction case over its decision to delist F Coin. The firm prevailed by zeroing in on structural security flaws at the token issuer and quickly unpacking complex blockchain issues.

The Seoul Central District Court’s Civil Division 50, led by Presiding Judge Lee Sang-hoon, dismissed in March an injunction request filed by token issuer A Foundation against Bithumb Korea to suspend the effect of the exchange’s decision to end trading support, according to the legal industry on May 11. Bithumb notified the market in February that it would delist the token after a review. That followed a December hack that generated more than 87.9 billion counterfeit F Coins, equal to 54 times the existing circulating supply. The issuer challenged the move with an injunction, but the court sided with Bithumb.

Yulchon, representing Bithumb through attorneys Lim Hyung-joo, Cho Hee-woo and Seo Ye-rim, relied on two core arguments. First, it focused on design flaws in a programming language developed independently by the issuer and showed that mass replication and unauthorized issuance of fake coins stemmed from structural vulnerabilities. The issuer argued that after more than 1 billion counterfeit coins entered circulation, it bought back and burned tokens in the market to limit the damage. Yulchon responded that more than 50 million coins were never recovered. It also argued that the follow-up measures came only after the token price had already plunged, making it difficult to treat them as a meaningful recovery of investor losses.

The firm also benefited from its handling of the injunction case’s compressed timetable. With only two to three weeks before the decision was set to take effect, Yulchon met filing deadlines that came every two to three days and submitted extensive technical briefs. At the case’s sole hearing, it clearly explained weaknesses in the blockchain system and the appropriateness of Bithumb’s actions, helping solidify the court’s view.

The court said there were grounds to conclude that structural vulnerabilities existed even before the hack. It also said it was difficult to determine that losses had been fully remedied after the token price fell sharply. The panel accepted most of Yulchon’s arguments. It further found no procedural defects, saying Bithumb had given the issuer multiple opportunities in advance to explain its position.

Cho Hee-woo, a Yulchon attorney, said the ruling confirmed that investor losses caused by a token-price decline following a security incident are damages that the token operator must bear. The decision also affirmed an exchange’s authority to independently review and decide on delistings to protect investors.

Jung Hee-won, Hankyung.com reporter, tophee@hankyung.com