IRA Financial Trust to file a lawsuit against Gemini over $36 mln crypto assets exploit

Gemini, a cryptocurrency exchange, is being sued by IRA Financial Trust for neglecting security, which led to a theft of $36 million from customers' accounts in February

By Shashank Bhardwaj

Image: Shutterstock

IRA Financial Trust, a self-directed asset retirement and pension account provider, filed a lawsuit against Gemini, a crypto exchange platform, for being negligent about the security of the customers' assets during an exploit.

IRA’s client accounts were held in the custody of the exchange. A breach took place on February 8, when crypto assets worth $36 million were withdrawn from customer accounts without legal authorisation during the exploit.

Ever since the lawsuit was filed, both the organisations have been blaming one another for the loss of funds. Additionally, the hack occurred around the same time as a fake 911 call that diverted many of IRA Financial Trust's employees from their work.

Gemini has set up many security features like fraud detection algorithms, two-factor authentication and whitelisting of withdrawal addresses to protect their overall system from single-point failures. Still, IRA Financial Trust has claimed that a single-point failure did occur in Gemini's systems.

They claimed that a master key exists that gives access to the customers' accounts that could override all built-in security measures within the exchange. The claim also stated that "Hackers were able to get possession of the IRA's master key by committing crimes."

One possible explanation is that the intrusion was allegedly triggered by unencrypted, unsecured email exchanges between Gemini and IRA Financial Trust. IRA Financial Trust still denies that Gemini ever informed them about the master key and what it could do.

The lawsuit is being filed less than a month after the two organisations had attempted to settle the matter out of court. IRA Financial Trust has claimed that if the court rules in their favour, they will use whatever compensation amount they get to cover the client's losses.

Gemini continues to deny any of the allegations that have been filed against them by the IRA and issued a statement saying that "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."

Shashank is the founder of yMedia. He ventured into crypto in 2013 and is an ETH maximalist. Twitter: @bhardwajshash

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