Caught Up in Steem Squabble, Bittrex to Return Tokens Diverted in Hard Fork

Bittrex really didn’t want to get involved in the war that’s currently raging within the Steem community.

Richie Lai, co-founder of the U.S.-based crypto exchange, posted an announcement late on Wednesday saying his firm would return – reluctantly, it seems – million of dollars worth of disputed cryptocurrency back to a Steem wallet no one knows who controls.

After the 23.6 million steem tokens were confiscated from community dissenters in a tit-for-tat Steem hard fork Wednesday, they were quickly diverted to Bittrex by an unknown individual (or individuals) in the hope they would be returned to their original 64 owners – currently all persona non grata at the blockchain project.

The controversial hoard is worth a little over $5 million at press time and was worth approximately $6.3 million at the time of the fork.

“We wish the entire Steem community could have addressed legitimate concerns in a manner which was viewed as fair by everyone,” said Lai. “The fact is, we only interpret the data on the blockchain, and in this case the consensus of the blockchain, regardless of how it was reached, agreed that the funds from those 64 accounts be moved to the ‘community321’ account.”

“We believe in the sanctity of blockchain, and as an industry we need to adhere to the consensus rules of the blockchain without interjecting whatever our personal opinions might be,” he continued. “If we want blockchain to succeed, we must live by the rules of the blockchain.”

“While I am among those frustrated by the outcome, my own personal feelings do not matter,” Lai said.

Wednesday’s Steem hard fork was the culmination of months of bitter infighting between those for and against the Tron Foundation’s takeover of Steemit – the largest application on Steem – earlier this year.

After the anti-Tron faction forked the network to create HIVE – a near-identical copy of Steem that copied over and then confiscated tokens linked to Tron founder Justin Sun – the pro-Tron team retaliated by forking Steem to seize tokens belonging to 64 of the former witnesses – blockchain validators – and stakeholders involved in creating the HIVE splinter group.

The tokens were sent to the mysterious wallet known as community321 but, as CoinDesk reported, were almost immediately sent to Bittrex’s platform. A note on the transaction said the funds had been “stolen by the Steem witnesses,” and asked Bittrex to “please return them to their original owners prior to the fork.”

No one knows who carried out the transaction (publicly, at least), but it was evidently someone from the anti-Tron lobby.

A former Steem witness, who goes by the name “Marky,” and had $46,000 worth of Steem confiscated Wednesday, told CoinDesk he believes this community member – whoever they may be – had access to an app and were able to cling on to the keys linked to the community321 wallet.

“There is a service run by an original community witness called AnonSteem, it allows users to make anonymous accounts,” Marky said. “They [the community321 wallet creator] used this service, and my initial guess is [a community member] saved the keys generated. Then used them to send the funds to Bittrex to rescue them.”

In an interesting twist to the whole saga, Bittrex’s procedure for returning hacked tokens is to first receive proof of ownership from the victim. “We must review the facts of this transfer in order to return these funds to the original wallet owner provided the owner or owners of the wallet can prove the funds belong to them,” Lai said in his notice.

In other words, whoever is sitting behind the community321 wallet may have to declare themselves, at least to Bittrex. It could be interesting to see who does, eventually, break cover.

At the time of writing, the funds still hadn’t been returned.