US’s largest crypto exchange, Coinbase, is currently considering suing over 1,000 of its registered users in the eastern European nation of Georgia for reportedly taking advantage of its pricing error on August 29, 2022. The pricing error changed Georgia’s currency to $290 instead of $2.90 on the exchange for about six hours.
The cryptocurrency exchange has revealed that the error occurred because of a third-party mistake. A Coinbase spokesperson stated that the company has partnered with law firm Gvinadze & Partners to help recover the funds.
However, the spokesperson didn’t reveal the exact steps the company is taking to do that but added that users who return the funds wouldn’t be subject to any litigation.
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Many users made a lot of money from the six-hour pricing error, which saw one Bitcoin trading for 5-6 million LARI, equivalent to $1.7 million rather than the average price of 55,000-60,000 LARI as of late August.
According to the popular media outlet, CoinDesk, Coinbase ensured a freeze of the bank accounts of some users who got improper funds after they withdrew the funds from the crypto exchange. Any action against the users won’t necessarily be because of the lost funds because the percentage is a minute fraction of Coinbase’s total user base.
Meanwhile, Hong Kong law firm Pinsent Masons’ partner Paul Haswell commented on the incident, saying that Coinbase and its users are subject to the same rules and regulations governing funds users received mistakenly.
“Generally, any funds or assets that mistakenly come into your account aren’t yours. You are subject to the law of that jurisdiction, or the person who transferred it to you by mistake could sue you to get it back,” he said.” Paul Haswell added that the crypto exchange would have a legal right to sue its users for funds return if the users’ terms have a clause to that effect.
A Similar Case
The U.S-based crypto platform is not the only exchange to experience such issues with tracking its funds. Singapore-based crypto exchange Crypto.com had a similar error in May 2021 when the company mistakenly sent AU$10.4 million (US$7.15 million) to an Australian woman instead of an AU$100 (US$68) refund.
The crypto exchange didn’t find out about the error until its December 2021 audit. However, Crypto.com later realized that the user had already used the money to purchase a house in north Melbourne when they tried to retrieve it. Two months ago, a Victoria Supreme Court judge ordered the sale of the house and all funds plus interest from the sale to Crypto.com.