Crypto Custodian BitGo Could Have Exaggerated Insurance Coverage Using Ambiguous Language
There are some reports that claim that BitGo has been exaggerating its insurance coverage by using “ambiguous language” when releasing public announcements. This is according to one of the underwriters behind the company.
Everything started with a press release published by the company explaining that one of the risks covered by a group of 10 Lloyd’s of London underwriters were “third-party hacks.” According to one of the 10 members of this group, this was misleading.
In a recent report released by CoinDesk, the underwriter explains that the company implies the policy covered hacks of online wallets. However, the policy just covers theft or loss of assets that are held in cold storage wallets.
The underwriter mentioned about it:
“The BitGo policy does NOT provide any cover for remote “third party hacks.” Cover is only provided for “storage media” in secure storage. In other words, there is no cover for any loss or sensitive information (private keys) resulting from the generation, transportation or transaction phases of the private keys’ life cycle.”
BitGo said to CoinDesk that they used a clear and specific language rather than an “ambiguous” wording as the underwriter said. Moreover, the firm said that Lloyd’s reviewed the statement and approved this specific wording.
Cryptocurrency exchanges have been hacked on several occasions by attackers that had access to online wallets. The best way to store funds, for both exchanges and individuals, is by using cold storage wallets such as hardware devices not connected to the internet.
BitGo mentioned the lead underwriter, AMTrust. However, the underwriter that marked the “ambiguous” wording is one of those that have a smaller exposure in case of a hack. Indeed, the lead underwriter will be offering the first $10 million of losses and the rest of the capital will be provided by the following overwriters for a smaller price.
Hence, it is important to understand that BitGo is protected against offline wallet hacks rather than online wallet attacks. The underwriter explained that he would be meeting with Lloyd’s in order to have some consistency in their approach to the media.