Singapore, which recently hosted a major international cryptocurrency conference, is now hosting its first cryptocurrency trial, according to The Straits Times.
Absurdly priced orders
The trial is a civil matter between two companies – B2C2 of London is suing Quione of Tokyo at the Singapore International Commercial Court. The two were in a business relationship, the terms of which are now under dispute.
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B2C2, represented by Rajah & Tann, is a liquidity provider for the cryptocurrency market, which means that it underwrites the value of transactions. It works with both fiat and cryptocurrency. According to its website, it has traded “tens of billions of dollars since 2015”. It was founded by Max Boonen, a former trader for Goldman Sachs.
It accuses Quoine, which is a financial technology provider, of reversing seven trades made by B2C2 customers because it considered them too risky. Quione contests this, claiming that a software glitch caused the problem.
B2C2 us seeking 3,085 bitcoins in damages, currently worth approximately $14 million. The reversed trades, however, were made in April 2017, when a bitcoin was worth around $1,200. According to that rate, the total damages would be around $3.7 million.
Said B2C2’s lawyer: “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.”
Quione’s answering statement said: “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.” It claims that a risk disclosure statement in the business contract allows it to cancel transactions “based on an aberrant value”.
This argument appears to undermine the firm’s contention that the trades were reversed because of a glitch.
Custodian on trust
Anyway, B2C2 denies this, arguing that the agreement defines Quione as “a custodian on trust” of cryptocurrency balances, meaning that it was not allowed to touch them without permission. Quione in its turn argues that B2C2 has exactly this type of agreement with other exchanges that it works with, and so it is logical that it would have agreed to these terms in this contract too.
Quoine, which was the first cryptocurrency-focused firm to receive a licence from Japan’s financial regulator. It raised approximately $280 million November 2017 in an ICO for a new service called ‘Liquid’, which connects customers to external cryptocurrency exchanges.
Cryptocurrency is not legal tender in Singapore, but the government is eager to encourage blockchain business. In October, the Managing Director of the Monetary Authority of Singapore, Ravi Menon, said that companies would be aided if they found themselves in conflict with banks.
Line of Japan and Binance of Hong Kong have both set up offices there for their respective crypto-ventures, and the Singapore Fintech Festival last week attracted people like the head of the IMF and the CEO of Ripple.
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