From Bad to Worse: Atomic Wallet Hit by Second Lawsuit

Russian Atomic Wallet users are readying legal action in a bid to recoup US$12 million in collective losses.

Atomic wallet worker putting up caution sign, as the land gets hit by an atomic lawsuit.
Created by Kornelija Poderskytė from DailyCoin
  • Russian litigants claim Atomic Wallet failed to update users and report the hack to authorities.
  • Atomic Wallet now faces two class action lawsuits following a June filing in the US District Court.
  • The wallet’s point of weakness remains a mystery.

The lack of secure crypto custody options remains a barrier to mass adoption. Instead of holding one’s digital assets on an exchange, self-custody is often touted as the most secure approach. However, as demonstrated by the recent Atomic Wallet hack, self-custodying crypto remains a precarious affair.

In a now-deleted tweet dated June 3rd, Atomic Wallet said it was investigating multiple reports of hacked wallets. Weeks later, a $100 million class action lawsuit was filed against the company in the US District Court of Colorado on the grounds of negligence and unlawful conduct. In a further twist, affected Russian users are preparing to file another class action against the company.

Russian Investors Seek Justice

Around 50 high net-worth individuals from Russia and the surrounding Commonwealth of Independent States (CIS), who lost a collective US$12 million in the hack, are preparing to file a class action lawsuit against Atomic Wallet, according to bne IntelliNews.

Legal experts Max Gutbrod and Boris Feldman represent the users, who told bne IntelliNews that they are working to recover the stolen funds on behalf of their clients. Gutbrod slammed Atomic Wallet over its lack of updates on the matter, adding that the firm did not report the incident to authorities.

Atomic Wallet Exploit Remains a Mystery

At the time of the hack, Atomic Wallet was heavily criticized for being slow to give updates. Affected users vented their anger in a non-deleted Reddit post titled “Several Days gone…Since 24 hours…there is no major update from Atomic wallet. What is really happening?” The most upvoted comment read:

“Seriously the lack of update for the scale of this hack is appalling. Being robbed because of the app security flaw and not by one's carelessness is intolerable…”

Atomic Wallet’s most recent tweet on the matter was posted on July 6th, which summarized a statement given on June 20th. The statement spoke of working to log reports and cooperating with on-chain intelligence firms and authorities. It also shortlisted four possible explanations for the exploit as: “virus targeting on local users devices, infrastructure breach, malware code injection, or a man-in-the-middle attack.” 

On the Flipside

  • Self-custody gives users full control of their crypto assets and circumvents loss in centralized exchanges going bankrupt.
  • Lawsuits may discourage crypto startups from participating in the space.

Why This Matters

The exploits have raised questions as to the true security of self-custody wallets and have dampened enthusiasm for crypto being the future of finance in retail and institutional spaces.  

Read more on claims the Lazarus Group was behind the Atomic Wallet hack:
Atomic Wallet Hack: Is North Korea Behind It?

Crypto winter forces CoinDCX redundancies. Find out more here:
Mumbai-Based CoinDCX Exchange Cuts Staff as Crypto Winter Bites Harder

This article is for information purposes only and should not be considered trading or investment advice. Nothing herein shall be construed as financial, legal, or tax advice. Trading forex, cryptocurrencies, and CFDs pose a considerable risk of loss.

Samuel Wan

Samuel Wan is a finance professional turned crypto journalist, known for his insightful reporting on market trends, regulatory changes, and technological developments within the digital asset industry. His ability to simplify complex concepts and report the facts has made him a trusted source in the crypto community. Beyond his writing, Samuel is an active mountain biker and gamer.