Key members of the Steem community have launched a lawsuit against crypto exchange Bittrex—which unexpectedly received over $5 million of cryptocurrency that the Steem community alleges was stolen from them—to get their funds back. The plaintiffs are asking the exchange to pay $16 million.
This is the latest step in a long running saga between the Steem community and Tron Foundation CEO Justin Sun, who bought Steemit Inc. in February, hoping to bring the blockchain-based social media site to his Tron ecosystem. But the backlash that resulted ended up in a battle for the blockchain between the original Steem witnesses (a witness is elected to run the blockchain) and the new ones that were voted in by Sun.
On May 20, these new witnesses seized $5 million of Steem tokens from 65 accounts and transferred them to an account. However, an unknown person with access to the account tried to save the money by sending it to Bittrex, with a note asking for it to be returned to its original owners. However, Bittrex refused—causing outrage from those who had their money taken.
As Decrypt revealed yesterday in a comprehensive tale of the Steem saga, the lawsuit was filed on May 8 2020 in the United States District Court for the Western District of Virginia. It was filed by Daniel Notestein, Daniel Hensley and others, who lost $3 million—60% of the seized money—when it was taken.
“Plaintiffs request an injunction compelling Bittrex, Inc. to release the Steem to their designated accounts immediately,” the document stated.
Bittrex responded to the complaint on July 15. The crypto exchange acknowledged that it had received the Steem tokens but denied many of the claims in the original complaint, asking for the lawsuit to be dismissed. One of its defenses was that the damages, or lost funds, were not caused by Bittrex itself—and that it should not be held responsible for the money.
The exchange further stated that the person who sent them the money “did not provide an identifying memorandum or any other information purporting to identify these ‘original owners’.”
Yesterday, the Steem community members responded in a filing that claimed Bittrex is not justified in believing that an unknown party may have stolen the funds. The Plaintiffs pointed to the accompanying message Bittrex received when it was passed the funds: “These are funds stolen by the Steem witnesses using HF23 May 20th 2020 – please return them to their original owners prior to the fork :).”
Bittrex had also expressed concerns about paying the cryptocurrency into the court. The plaintiffs claimed that the exchange could create a sub-account within the Bittrex account and store it there. They expressed concern that if the money was put together in one account (rather than stored in Bittrex’s larger pool of exchange funds) and sent to the court, then it could be seized yet again.