Singapore’s first legal dispute involving bitcoin begins

Market maker suing over a 'unilateral reversal' of seven orders on exchange, with amount in dispute said to be worth about $19m

The trial in Singapore's first legal dispute involving the cryptocurrency bitcoin started yesterday, with a court expected to decide whether a number of trades done in April last year had been wrongfully reversed - leading to proceeds being deducted without authorisation.

In the case, which is being heard in the Singapore International Commercial Court, electronic market maker B2C2 is suing cryptocurrency exchange operator Quoine over a "unilateral reversal" of seven orders on its platform.

A market maker buys and sells financial instruments, hoping to make a profit on the bid-offer spreads.

B2C2 seeks to recover about 3,085 bitcoins from Quoine, with its lawyers charging in an opening statement that Quoine had sought to "abuse its role as operator of the platform" and "acted in breach" of trust as a custodian for B2C2. It is represented by lawyers led by Mr Danny Ong of Rajah & Tann.

No dollar amount was cited in court documents seen by The Straits Times, but according to cryptocurrency news site CoinDesk, the disputed amount translates to more than US$14 million (S$19 million).

This potential value swelled late last year, following bitcoin's meteoric surge past US$11,000 at one point.

The plaintiff said in its opening statement: "It is B2C2's contention that in the face of serious risk of itself having to bear the financial loss arising from the trades… Quoine chose the most advantageous course to mitigate such risk - by simply reversing the 'irreversible' trades and deducting the bitcoin proceeds from the account."

"There would then be no necessity for Quoine to seek payment from (its customers) and if they were unable or refused to pay, to shoulder the financial risk itself and be 'out of pocket' for the bitcoin proceeds," the statement added.

Quoine, represented by a team led by Mr Paul Ong of Allen and Gledhill, countered that a glitch in its quoter program leading up to the disputed trades had caused it to be "unable to access external market price data" for the two cryptocurrencies in question, ethereum and bitcoin.

Due to the glitch, the program stopped creating or placing new orders involving these currencies on the platform, causing issues with liquidity and hence, problems with the orders made by B2C2.

"There is no other way than to describe these orders as abnormally and absurdly priced orders, given that they were about 250 times higher than the average price at which (the two currencies) then traded on the platform," said the defendant.

On April 19 last year, B2C2 placed its seven orders to sell ethereum for bitcoin at a rate of 10 bitcoins for one ethereum.

The trades were reversed the following day.

B2C2 co-founder Maxime Boonen took the stand yesterday.