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Officially one month has passed since Coinbase had a technical issue that ended up costing the company around $30 million, and now they are seeking to get their money back through legal action.
For those who are unaware of what happened, about a month ago Coinbase had a technical problem which allowed users who reside in the Republic of Georgia to sell their cryptocurrencies for 100 times the market price. At the time this error occurred, the exchange rate of USD/GEL was 2.90, but a third-party error (according to Coinbase) caused this exchange rate to be set at 1 USD = 290 GEL. Thanks to this, Georgian traders were able to sell the cryptocurrencies that they had in their Coinbase accounts for 100 times the market price. This was not a short-lived error, as sources suggest that the exchange rate was broken for around 7 hours, yet, according to Coinbase, only around 1000 users managed to grab this once in a lifetime opportunity and make some fat stacks. When this event took place, Georgian banks froze the bank accounts of those who withdrew money from Coinbase, but a few days later these restrictions were lifted and people were able to access their accounts as normal, including the funds withdrawn from Coinbase.
While this was going on, Coinbase remained practically silent on the whole situation and didn't make any public announcements or contacted any trader who withdrew big amounts of money that were made during this technical error.
Now that a month had passed since this event took place, Coinbase just made its first contact with these Georgian traders, asking them to return these improperly credited funds.
The email sent out to these traders reads as follows: “It has come to our attention that you were improperly credited approximately (the amount of money withdrawn) Georgian Lari (GEL). These funds must be returned to Coinbase promptly, and we are writing to coordinate the details of that return.”
The email then continues on by explaining exactly what had happened and asks traders to respond to a specific email address and inform them that they will be returning these funds no later than 5 pm Pacific time, 3rd October 2022. They also mention that Coinbase will reimburse traders for wire and/or exchange fees for their return of the GEL.
The email ends with Coinbase stating that if traders don't respond to this email immediately, Coinbase reserves the right to take all appropriate additional steps, including legal action in trying to regain said funds.
The interesting thing about this email is the fact that it originated from Kenya of all places. As Coinbase is a publicly traded company registered in the United States of America, it is unclear why these emails originated in Kenya.
Another unknown is the strength of the legal action that Coinbase will be able to pursue, if any. Emails being sent from Kenya might suggest that Coinbase could start legal action in Kenya, but the relationship between Georgian and Kenyan courts is unclear to say the least. Is it just a last-ditch attempt by Coinbase to scare these traders in the hopes that some might return the money and so repair some portion of damages that way, or are they going to fully back their legal claims and try everything in their power to reclaim the lost funds?
Currently, Coinbase is faced with a $350 million lawsuit, in which they are accused of infringing on a technological patent, meaning they already have quite a lot of other legal matters to deal with. Therefore, the Georgian traders who did not respond to the email and don't plan on returning any of the money, which according to them, they made legally and did not break any laws in order to procure, can just sit back and wait for 3 October 2022 to roll around and see what action Coinbase will decide to take.
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