YouBit — Hacked Twice, Bankrupt by Design, Users Paid Seventy-Five Cents on the Dollar

YouBit, a South Korean cryptocurrency exchange formerly operating under the name Yapizon, collapsed into bankruptcy on December 19, 2017, after sustaining two separate intrusions in the same calendar year that together stripped approximately 21 percent of its total assets. The April 2017 hack cost the exchange 3,816 bitcoin, valued at approximately $5 million at the time. The December 2017 hack — attributed by South Korean intelligence and independent security researchers to the North Korean state-linked Lazarus Group — removed a further 17 percent of remaining assets, estimated at between $7 million and $16 million in contemporary reporting. Upon filing for bankruptcy, the exchange’s parent company, Yapian, announced that users would receive an immediate payment equivalent to 75 percent of their holdings, with the balance subject to the bankruptcy process.

That 25 percent haircut, imposed unilaterally at the moment of failure, was not the end of the controversy. Yapian had obtained a cyber insurance policy from DB Insurance just 20 days before declaring bankruptcy. DB Insurance denied the claim, asserting that Yapian had violated its advance notice obligation — the standard requirement for policyholders to disclose material information that would affect the policy before purchasing it. The insurer’s denial was based on the inference that Yapian had known of existing vulnerabilities or risks at the time it took out coverage. Critics argued the insurance was obtained specifically to limit the operator’s financial exposure at bankruptcy, a charge Yapian denied.

The exchange briefly re-emerged in 2018 under the Coinbin brand following an acquisition, but that entity also collapsed in February 2019 after its CEO disclosed that a former Youbit executive — identified as a general manager named Lee — had embezzled company funds and deleted private keys controlling wallets holding approximately 100 ETH. Total losses at CoinBin’s bankruptcy were placed at $26 million. No criminal conviction of exchange operators in connection with the YouBit bankruptcy proceedings specifically has been confirmed in publicly available reporting; the CoinBin case generated separate embezzlement allegations against the named employee.