B2C2 Ltd. placed seven orders on April 19, 2017, to sell ether for bitcoin at the rate of ten BTC for one ETH, but Quoine reversed the order the following day. B2C2 then sought the court’s intervention to help in the recovery of 3,092 bitcoins involved in the trade asserting that Quoine had acted in a breach of trust as its custodian.
Breach of Contract and Breach of Trust
The Singapore International Commercial Court (SICC) published the case summary on March 14, 2019, and placed the blame squarely on Quoine Exchange. The court ruled that the exchange was liable for a “breach of contract and breach of trust” by reversing B2C2’s trades for 3,092 bitcoins belonging to the crypto market maker done at an “abnormal” exchange rate two years ago.
According to the court’s report, B2C2 Ltd. made seven trades where it sold ether (ETH) at ten bitcoin (BTC) per token, which was at least 250 times higher than the trending market rate of 0.04 BTC for one ETH at that time.
Quoine went ahead and automatically credited the proceeds of the trades to B2C2’s account, and the corresponding amount of 309 ETH was debited. For the uninitiated, B2C2 is one of the largest liquidity providers in the crypto space.
System Malfunction Led to Disputed Trades
Quoine discovered the anomaly the following day and unilaterally canceled the seven trades before resetting the account balances to their pre-trade state. Feeling aggrieved, B2C2 sued Quoine in August 2017, aiming to recover from the exchange the 3,092 bitcoin, which are worth approximately $12 million at the current rate. B2C2 told the court at the time:
“Quoine had no contractual right unilaterally to cancel the trades once the orders had been affected.”
In its defense, Quoine stated that a malfunction in its systems led to the execution of the disputed trades as it was unable to access external market price data for the two cryptocurrencies involved. The exchange explained that the program stopped placing new orders involving the two cryptocurrencies, creating liquidity issues the resulted in the problems caused by B2C2’s orders.
Hallmark Characteristics of Property
The SICC ruled in favor of B2C2 but refused to order Quoine to return the BTC to B2C2 because the price was substantially higher than the April 2017 price margin when the trades were performed.
In April 2017, a single Bitcoin was worth $1,300 compared to today’s $3,850. The court argued that paying at the current rate would “result in substantial hardship” to Quoine. The court stated:
“Instead, the plaintiff’s [B2C2] remedy lay only in damages which, if not agreed, will be assessed at a subsequent hearing.”
This case is SICC’s first judgment involving cryptocurrencies in which it has found that cryptocurrencies bear the “hallmark characteristics of property.” Quoine has told a local publication, The Business Times it was disappointed with the judgment and the exchange’s CEO Mike Kayamori stated:
“We are reviewing the judgment and considering our options, including the possibility of an appeal.”