Months ago, a Quoine (also Quoinex) system glitch triggered an erroneous 3,085 bitcoin transfer. Ultimately, the exchange reversed the transaction. In response, the beneficiary sued.
A possible landmark cryptocurrency case, the presiding court may be forced to consider a still unanswered legal question: Is it legal for exchanges to reverse coin transactions?
THE GLITCH THAT TRIGGERED A MULTI-MILLION-DOLLAR “ERRONEOUS” BITCOIN TRANSFER
In mid-April, Quoine ran a hack-prevention script. Unfortunately, the protective program triggered a glitch that artificially lowered Bitcoin’s price on its system. Because of the snafu, Quoine user B2C2 was able to purchase ten bitcoins for one ETH. So, he grabbed 3,085 bitcoins, which calculated to US $3.78 million, at the time.
Quoine discovered the out-size exchange and reversed the trade.
B2C2’S ARGUMENT: FRAUD
B2C2 sued on the grounds that Quoine “acted fraudulently.”
To make matters more (legally) interesting, Quoine’s trading agreement says orders are irreversible — a cornerstone of B2C2’s case. And since the exchange did reverse the trade, the market maker believes Quoine made a tortious misstep by violating its own agreement.
QUOINE’S ARGUMENT: OBVIOUS MISTAKE
Quoine, as you may have already guessed, doesn’t think B2C2 has a solid case. It’s primary counter argument? The plaintiff is “being opportunistic and seeking to profit from a technical glitch.”
WHO WILL PROBABLY WIN THIS BITCOIN LAWSUIT?
Who will win? It’s way too early to tell; arguments and evidence have yet to be presented. But if we were to guess, the enforceability of Quoine’s trading agreement, in this scenario, will likely be a crux of the case.
The “Quoine reversal” decision could be a game-changer. Irreversibility is a large part of blockchain’s allure. If exchanges start executing reversals on their own, with global support from courts, the philosophical and technical standards debate will rage, elusively, on.
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