Today, a friend from the media found Zhengyao Lawyer and wanted to talk to a lawyer in the cryptocurrency circle about the legal issues surrounding the hacker attack on DEXX that resulted in the theft of assets of a large number of users, and also to discuss whether the cryptocurrency KOLs had any legal responsibility in this incident.
Based on the legal provisions within my country and the professional requirements for lawyers, I cannot disclose any substantive information to this journalist friend. However, given that "DEXX platform hacked" has become the hottest topic in the cryptocurrency community, I will still use this article to popularize the law and talk about the legal risks of the DEXX platform (which can actually also be applied to other virtual currency platforms) and the KOLs who promote the DEXX platform in as objective and neutral a position as possible.
1. Introduction to DEXX Platform
According to the introduction of the DEXX platform, "DEXX is a new generation of token trading tools that integrates and innovates the current products on the market, such as Telegram Bot and DEX, which have low security, complex operation and interaction processes, and single functions. It allows novice users to enter the on-chain world without barriers .
DEXX is a multi-platform on-chain comprehensive trading tool used to manage on-chain funds, multi-strategy trading, observe token market data, etc., providing on-chain players with a faster, more convenient and more comprehensive on-chain token trading experience. "
At the same time, according to the content disclosed on its official website, the main company of the platform is DEXX LTD, which is registered in Colorado, USA, and is applicable to qualified users in the United States; in addition, there are registered companies in countries and regions such as the Bahamas, Singapore, Marshall Islands, Japan, and Hong Kong, corresponding to users around the world or where they are registered.
The lawyer specifically noted that DEXX included the following statement: "All tokens displayed on the DEXX website/App are not investment advice. Token trading is risky. Be sure to independently research and consider all possible risks. DEXX does not assume any responsibility for any losses arising from your transactions."
2. DEXX hacker attack
On November 16, 2024, two official DEXX accounts on X (formerly Twitter) released information, saying that many users of the platform reported that their tokens had been transferred away, and the DEXX platform has now made every effort to resolve the matter. In the English version of the tweet, the DEXX platform sent an open letter to the hacker, stating that as long as the hacker can return the user's tokens, DEXX will no longer pursue the hacker's legal responsibility and will also provide a generous reward.
3. Legal Risk Analysis of All Parties
1. DEXX Platform
For users, whether the platform has committed theft is the most concerned issue for the affected users and other stakeholders. “No Rug” is the response given by the project team on the X platform, but these three words alone are obviously not enough to dispel users’ doubts. According to public information, the SlowMist Technology team is already working on the statistics of affected users’ information and on-chain tracking and tracing.
There is no public information showing that the operator of the DEXX platform is a mainland Chinese citizen, but some people have already exposed the platform's "boss" and "management personnel" online. At the same time, according to some users' public information, they have reported the case to the public security organs, but there is no "Acceptance Notice" or "Case Filing Decision" and other documents have been made public; at the same time, DEXX has not disclosed whether it has sought help from the mainland Chinese public security.
Theft crime risk
According to Lawyer Liu’s experience in criminal defense in the cryptocurrency industry, unless there is very strong evidence to prove that the platform has stolen users’ encrypted assets and the platform’s boss, management and other core personnel are from mainland China, the mainland police will have a chance to accept the case.
Pyramid scheme crime risk
Another risk for DEXX is whether it constitutes the legal risk of organizing and leading a pyramid scheme. my country's laws define pyramid schemes as providing goods or services in the name of more than three levels and involving more than 30 people, and the ultimate goal is to defraud others of their property. In this case, it is very likely to be identified as a pyramid scheme.
The figure below shows the promotion rebate rules of the DEXX platform.
Other criminal risks
I was just about to get a lawyer’s opinion that the DEXX platform might be suspected of violating citizens’ personal information or committing fraud. I think it is difficult to commit fraud because for any blockchain project, it is difficult for users to prove that they delivered the property (tokens) to any third party or project party based on a misunderstanding when using it. At most, the property was stolen by hackers, or the project party embezzled the property. It requires evidence to prove who stole the customer’s assets, but it is impossible to constitute a fraud crime.
In fact, it is quite reluctant to accuse the crime of infringing citizens' personal information (the crime of infringing on public rights). The crime of infringing on public rights stipulated in Article 253 of the Criminal Law of my country must require "the act of selling or providing citizens' personal information to others in violation of state regulations, with serious circumstances" or "the act of selling or providing citizens' personal information obtained in the course of performing duties or providing services in violation of state regulations, with serious circumstances" or "the act of stealing citizens' personal information"; looking at the DEXX platform, at least at present, there is no information showing that the platform has provided, sold or stolen citizens' personal information to people outside the platform. So it is difficult to say that the platform is suspected of infringing on public rights.
Are the platform’s disclaimers and jurisdiction agreements valid?
Just as the lawyer carefully read the DEXX platform's "Terms of Service", Article 7 stipulates the platform's disclaimer:
It stipulates that the platform will not be liable for compensation for user losses caused by "denial of service attacks, viruses, etc." Denial of service attacks (DDOS attacks) are just a type of hacker attacks. It is not clear what technical means this attack was carried out by. However, does the platform have the right to refuse to compensate users according to this agreement? This involves the issue of legal jurisdiction (that is, whether this agreement can be applied to the laws of mainland China).
Unfortunately, the DEXX platform stipulates that the applicable law and jurisdiction are in Hong Kong, so whether the exemption clause in Article 7 is valid depends on the laws of Hong Kong. In fact, even if the laws of mainland China are applicable, based on the current "risk-bearing principle" of virtual currency investment in mainland China, it is difficult for users to sue in court to protect their rights.
However, the lawyer saw a blogger named "Roy" on the X platform saying that the platform would compensate users for their losses. It is still unknown whether this information represents the official attitude of DEXX.
2. KOLs who provide publicity and promotion
In this DEXX hacking incident, in addition to the primary target of the platform (suspecting that the platform stole the information), the biggest accusation is directed at the KOLs in the cryptocurrency circle who once supported and endorsed DEXX. Some of these KOLs did not act properly - they quietly deleted their tweets. Although it was not the KOLs who stole user assets, as beneficiaries who had been paid to promote the platform involved, at least they should make a statement on the incident. Quietly deleting tweets makes people feel that DEXX has done something bad, which is a bit like adding insult to injury. Whether it is for their own fans or for their former sponsors, it is an unpleasant behavior.
In addition to moral flaws, do KOLs face any legal risks?
Lawyers believe that unless there is evidence to prove that KOLs participated in the theft of coins by hackers, or participated in the platform's embezzlement (of course, in both cases it is necessary to first prove that the hackers or the platform had stolen coins), then the KOLs are accomplices in the crime of theft; other than that, it is difficult to say that there are any legal risks.
As for whether KOL constitutes the crime of illegal use of information networks (non-trust crime), my view is that according to Article 287 of my country's Criminal Law, combined with the specific circumstances of the DEXX incident, the premise for KOL to constitute a non-trust crime is "publishing information for (others) to commit fraud and other illegal and criminal activities." The premise here is that it is necessary to prove that KOL knew that the DEXX platform was a platform for committing illegal and criminal activities when promoting and publicizing the DEXX platform. This kind of proof is difficult and must be based on the premise that the DEXX platform constitutes a crime (there is no conclusion on this at present).
(Tweet from a blogger on platform X)
3. Legal risks to victims
For victims of the DEXX theft, lawyers must advise one thing: protect your rights rationally. Currently, there have been cases of "opening boxes" of DEXX bosses and executives on the Internet, and their names, ID numbers, home addresses and other information have been made public (this behavior is actually illegal). I even saw a netizen in a telegram group who lost nearly a million and planned to go to the public address of the boss to "realize" the boss.
As a criminal lawyer, I would definitely advise individual victims to keep proof as soon as possible and report to the police in a timely manner, rather than seeking private relief or even taking radical actions, which often do not pay off and in serious cases will involve themselves in legal disputes. Although my country currently has almost zero protection for virtual currency investment, there is still a high probability that criminal cases will be filed for cases that have a serious social impact, a large number of victims, and huge losses.
4. Final Thoughts
Since the ICO movement in the cryptocurrency circle in 2017, we have witnessed a large number of crazy cryptocurrency speculators and the corresponding large number of project owners running away. At present, we are not sure what the truth is about the DEXX platform hacking incident. The truth may soon come out, or it may never come out. This also reminds the majority of cryptocurrency players, what is the most important thing in the cryptocurrency circle?
Safety! Safety! Safety always comes first!
