On July 31st, 2017, The Stratis Times announced that Quoine, a prominent cryptocurrency exchange has had a lawsuit filed against them for “fraudulently” reversing ETH to BTC trades on April 19th. The plaintiff, a cryptocurrency trader named B2C2 had placed buy orders for BTC using ETH at an exchange rate of 10BTC:1ETH, more than 120 times the market value of ETH at the time.
Why is Quoine being sued?
B2C2 is suing the exchange in the High Court of Singapore to reclaim the 3084.79BTC which was taken away by the exchange.
In the Quoine trading agreement, it is stated that transactions are “irreversible” once filled, which is the reason for the lawsuit. The plaintiff claims that Quoine has violated their own trading agreement by reversing transactions that have already been filled. According to bitcoin.com, B2C2 purchased 3092.52BTC for the cost of 309.25ETH.
The next day, Quoine had removed 3084.79BTC from the account of B2C2, a sum estimated to be worth $8.83 million at the time this article was written. It is worth noting that during the ETH flash crash, CoinBase elected not to reverse transactions and compensated users who lost funds due to stop-loss and margin liquidations using company funds.
How did Quoine respond?
Quoine claimed that the error was a result of critical system maintenance including password reconfiguration which must be done to fend off persistent hacking threats.
B2C2 claims that by reversing the already resolved trades, Quoine violated their end of the trading agreement and acted fraudulently. Quoine responded by claiming they were able to do so because the trades were mostly trades with a huge markup over any fair market value for ETH at the time.
Quoine went on to comment that B2C2 had made other BTC and ETH trades on their platform days earlier on the 15th and 18th of April at abnormally high rates. According to Quoine, B2C2 was a “sophisticated investor and should have to know that the extremely high difference was a glitch, that they were merely being opportunistic and hoping to profit from their systems glitch.
Why is the action Quoine took such a big deal?
Quoine states in their trading agreement that trades, once filled cannot be reversed. By reversing the trades that B2C2 made after they were filled, they violated their own trading agreement, an action that demonstrates to their users that trades can, in fact, be reversed, setting a precedent for other exchanges to respond similarly.
While it is unfortunate that the glitch moved more than 3,000BTC (at the time worth roughly $1,220), the question remains, should Quoine be allowed to violate their own trading agreement and reverse the transaction after they have already been filled, and credited to the user’s account?
If so, how can users have faith that their transactions will not be reversed at will in the future on Quoine, or any other exchange for that matter?
Do you think Quoine should have reversed the transactions? Let us know in the comments below!