A leading platform for self-directed retirement accounts promises to reimburse clients for lawsuit income.
- Early stages are underway for a $36 million lawsuit by client-led retirement firm IRA Financial against cryptocurrency trading exchange Gemini.
- The complaint alleges that lax cybersecurity and flawed software led to millions of dollars worth of digital assets being stolen from Gemini’s platform customers.
- The multimillion-dollar theft occurred in February, but IRA Financial alleges that Gemini has not cooperated, resulting in the court filing earlier this month.
Preliminary discovery stages are underway in a $36 million lawsuit between IRA Financial Trust, a leading platform for self-directed retirement and pension accounts, and cryptocurrency exchange and custody wallet provider Gemini Trust Company.
According to the complaint, IRA alleges that Gemini failed to provide adequate safeguards to protect IRA Financial customers’ crypto assets stored on the Gemini trading exchange. Additionally, the lawsuit claims that Gemini failed to freeze the accounts within a sufficient period of time immediately following the incident. It is alleged that Gemini’s lack of quick response allowed hackers to continue siphoning funds for hours from customer accounts on the Gemini exchange after Gemini was notified by the IRA.
“IRA Financial brought this lawsuit because, contrary to Gemini’s many public statements about how it prioritizes security, the Gemini platform inexplicably had a single point of failure that allowed criminals to steal tens of millions of dollars in crypto assets from accounts. retirement clients. This lawsuit seeks to remedy the massive harm the IRA suffered. The IRA looks forward to proving its claims in court,” Eric Ostroff, legal counsel for the IRA, was quoted as saying in the official announcement of the lawsuit.
Presumed single point of failure
A key element of the lawsuit is IRA Financial’s claim that, despite Gemini’s highly publicized multi-layered security approach, it created a “master key” for the IRA Financial account. It then allegedly placed all IRA client accounts under that unique key as subaccounts, creating a solitary entry point that hackers were required to compromise, which they did.
“Critically, Gemini never informed IRA of the power of this master key. Rather, Gemini itself treated IRA’s master key as if it were mundane information, repeatedly exchanging unencrypted, unsecured emails with IRA containing the key. Not only did the Gemini system harbor a single point of failure, but it also contained a major vulnerability that allowed a single customer account breach to metastasize across all accounts, the complaint reads.
In a recent press release, a Gemini spokesperson refuted the allegations and said the lawsuit is baseless, stating, “Our security standards are among the highest in the industry and we constantly update them to ensure our customers are always 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,” as quoted in the media article.
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The complaint goes on to state that the hackers made off with tens of millions of dollars worth of Bitcoin and Ethereum, respectively. IRA Financial is committed to reimbursing clients with proceeds recovered from the Gemini litigation.
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