They get Bitcoin for $6,100, but have to pay it back…
Imagine this situation. The price of Bitcoin (BTC) is trading around $50,000 on the markets, but only one platform is curiously showing it at $6,100. Without thinking, you quickly buy as much BTC as possible according to your cash flow and then send it to another platform and ensure a substantial gain. You just did arbitration, and not just a little bit.
This is exactly what happened on the Philippine Digital Assets Exchange , or PDAX, considered one of the largest in Southeast Asia. As local media outlet Manila Bulletin reports, a technical problem on the platform on February 16th caused the price of Bitcoin to fall from 2.4 million Philippine pesos ($49,300) to nearly 300,000 Philippine pesos, or about $6,100.
Many users then jumped at the chance and got rich in a matter of seconds, at least virtually. Until the platform reacted to the situation, several PDAX traders managed to withdraw the bitcoins they had just bought with a massive discount.
The vast majority of users were not able to remove more than 1 BTC from the platform, which is the daily withdrawal limit set by PDAX for individual accounts.
While a plethora of traders were certainly celebrating the opportunity they had just seized, PDAX would have demanded from these users the reimbursement of the BTC obtained during this sudden crash, or risk possible legal action…
In the 36 hours following the incident, the platform locked in wallet access, preventing users from making any movement.
Is the platform entitled to request a refund?
On 23 February, PDAX CEO Nichel Gaba wanted to clarify the situation at a press conference. The platform would have been hit by a bug to coincide an order without provision with an order with provision. Such a malfunction resulted in a snowball effect that caused the price of the BTC to fall to $6,100.
“Our system has been hit by an unprecedented increase in the number of transactions, which has led to significant maintenance problems. The number of transactions on PDAX has increased 70-fold in recent months,”
says Nichel Gaba.
But then is the platform entitled to claim reimbursement for these BTCs? Theoretically not, the platform is at fault and if users have managed to buy BTC at such a low rate, PDAX remains solely responsible.
However, the platform seems determined to recover the BTC included in the case. Following threats received from PDAX, a user who managed to purchase 1 BTC at $6,100 even asked for advice on Reddit:
“After almost 24 hours, they sent me a letter of formal notice and an SMS, asking me to retransfer the BTC – which was purchased in accordance with my rights without violating any laws or regulations of the platform – or they “could” be forced to take legal action against me.”
There is no requirement for users to refund the platform, and they can now take advantage of their acquired BTC for a few thousand dollars.
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