Coinbase, the world’s second-largest cryptocurrency exchange by volume, indicated it could sue approximately 1,000 traders for abusing a pricing glitch that happened in the republic of Georgia back in August this year.
Coinbase sue traders who abused erroneous lari price
On August 29, around 1,000 Coinbase users in Georgia took advantage of the so-called “arbitrage opportunity” when the lari, the local currency, was priced at $290 rather than $2.90 for almost six hours.
According to Coinbase, “the glitch was a fault of a third party” that the company refused to identify. However, financial authorities are now facing a huge problem – the risks that come from the fact that institutions are collaborating with external parties.
U.S. Comptroller of the Currency Michael Hsu explained that it’s easy to find the guilty party when everything is done within one financial institution.
“When work is split between an institution and fintech startups with different business models, however, that’s when risk can get lost,” he added.
Coinbase didn’t want to reveal the amount of the lost money either but said it was “immaterial”.
According to the statement, Coinbase is cooperating with law company Gvinadze & Partners to try to get back “improperly credited funds”.
Avtandil Kutchava, host of the Georgian television show “Crypto Bazari,” said over 400 people reached out, explaining that they could have made millions of dollars on trades.
He explained that one Bitcoin was trading for 5,000,000 to 6,000,000 lari, or around $1.7 million apiece, while the average price in late August was just 55,000 to 60,000 lari.
According to the exchange, two Georgian banks, the Bank of Georgia and TBC, first froze the suspicious accounts. However, they unfroze them afterward without explanation.
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