Singapore's first legal dispute involving the
cryptocurrency bitcoin has erupted over trade proceeds worth around
US$3.78 million (S$5.15 million).
An electronic market maker is suing Quoine, one of the
world's major bitcoin exchange operators, over trades that were
allegedly wrongfully reversed, which resulted in proceeds being
deducted.
The market maker, B2C2, said it placed orders on
Quoine's platform to sell ethereum - another cryptocurrency - for
bitcoin at the price of 10 bitcoin for one ethereum.
The orders were filled in a series of trades on April
19, resulting in B2C2 paying 309.2518 ethereum for 3092.517116
bitcoin.
The bitcoin was credited into B2C2's account that
day.
But the next day, the trades were reversed by Quoine,
which is incorporated here, and the proceeds allegedly
"misappropriated" from the account without authorisation.
Quoine told B2C2 it was entitled to do so because the
trades were "mostly trades with huge mark-up over fair global
market price", the suit said.
B2C2 claims Quoine had "acted fraudulently" because the
agreement stated that an order, once filled, is "irreversible".
It is seeking to recover 3084.78582325 bitcoin from
Quoine in the High Court.
Quoine, a fintech firm that offers
cryptocurrency-related services, was co-founded by Mr Mike
Kayamori, who has held senior roles at Mitsubishi Corp and Softbank
Group.
No dollar value for that amount of bitcoin was provided
in the lawsuit, but according to cryptocurrency exchange CoinDesk,
that amount translates to US$3.78 million based on an exchange rate
of US$1,226.94 for one bitcoin on April 19.
Quoine, in turn, claims B2C2 is "being opportunistic
and seeking to profit from a technical glitch". It said the trades
were executed at the "abnormal rate" of 10 bitcoin for one
ethereum, about 125 times higher than the actual market price then
because of a technical glitch.
It said the average market price that day was only
about 0.03929075 bitcoin for one ethereum.
The glitch severely disrupted Quoine's ability to
retrieve actual market prices for bitcoin and ethereum.
It said the glitch arose because it was reconfiguring
passwords for its critical systems to fend off persistent attempts
by hackers to break into its systems.
Given the "stark difference between the abnormal rate
and the actual market prices of bitcoin and ethereum on April 19",
B2C2, which Quoine called a "sophisticated" investor with
experience trading virtual currencies, should have suspected the
"abnormal rate" was a mistake.
It also noted B2C2 had done other bitcoin and
ethereum-related trades on Quoine at prevailing market rates
between April 15 and 18.
Public resources such as CoinDesk and WorldCoinIndex
would have shown that the abnormal rate could not be an accurate
reflection of the market prices of these two virtual currencies on
April 19, Quoine said.
TNP