By
Steve Muchoki
April 19th, 2024
Owing to a February 2022 hack of $36 million, the IRA accused Gemini for lack of transparency with its cybersecurity protocols and failing to provide sufficient security for the funds.
On Monday, June 6, IRA Financial Trust (IRA) slapped a lawsuit on the Gemini Trust Company, a crypto custodian and trading platform. The IRA has accused crypto exchange Gemini of its negligence in safeguarding customers’ crypto assets during a February 2022 exploit.
The IRA Financial Trust handles individual retirement and pension accounts held in Bitcoins. Earlier this year in February, the hackers stole $36 million worth of crypto from IRA Financial accounts. During the hack, criminals managed to steal $21 million in Bitcoin and $15 million in Ethereum.
IRA Financial Trust said that it was using Gemini’s custodial services to hold its cryptocurrencies. However, it blamed Gemini saying that it “failed to freeze accounts within a sufficient time frame immediately following the incident”. This allowed criminals to move funds out of IRA’s customers’ accounts.
The lawsuit mentions Gemini’s lack of transparency with its cybersecurity protocols. It notes that Gemini’s platform API has been designed with a single point of failure.
In the press release, the IRA Financial Trust said that it will work to find a resolution for all impacted customers. It has also pledged to use the proceeds from the lawsuit to reimburse customers impacted by the February 8, 2022, incident. Eric Ostroff, one of the two lawyers representing IRA in the lawsuit said:
“IRA Financial filed this lawsuit because, contrary to Gemini’s many public statements about how it prioritizes security, Gemini’s platform inexplicably had a single point of failure that allowed criminals to steal tens of millions of dollars of crypto assets from customer retirement accounts. This lawsuit seeks to remedy the massive damage that IRA suffered. IRA looks forward to proving its claims in court.”
Gemini Denies the Allegations Made
Since the loss of funds, both Gemini and the IRA Financial Trust have been blaming each other. IRA said that a master key existed for clients’ accounts, however, it was easy to bypass all the built-in security measures.
One scenario also shows a series of unsecured and unencrypted email exchanges between Gemini and IRA Financial Trust. But IRA says that Gemini didn’t inform them about the master key in the first place. The lawsuit comes just under a month after both parties failed to arrive at an out-of-court settlement.
Crypto exchange Gemini says that it isn’t responsible for the stolen funds at the IRA. Representatives of the crypto exchange told CoinTelegraph:
“We reject the allegations in the lawsuit. Our security standards are among the highest in the industry and we are constantly updating them to ensure our customers are always protected. In this matter as soon as IRA Financial notified us of their security incident we acted quickly to mitigate the loss of funds from their accounts.”
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