B

Facts

Quoine (D) is a Singapore-registered company which operates a currency exchange platform enabling third parties to trade virtual currencies for other virtual currencies or for fiat currencies such as Singapore or US dollars. The cryptocurrencies involved are Bitcoin (BTC) and Ethereum (ETH). B2C2 (P) is a company registered in England and Wales trading as an electronic market maker. P opened an account on P on 28 June 2015. This was done electronically online and P accepted D’s Terms and Conditions. As part of those terms and conditions, the Agreement stated: 

'Furthermore, once an order is filled, you are notified via the Platform and such an action is irreversible.' 

'The exchange functions of The Platform will fill in orders at the best possible available market price. Note that as markets move continuously, the prices displayed on user interfaces, on our web app, or mobile apps are in no way guaranteed.' 

'You agree that the Company reserves the right to change any of the terms, rights, obligations, privileges or institute new charges for access to or continued use of services at any time, with or without providing notice of such change. You are responsible for reviewing the information and terms of usage as may be posted from time to time. Continued use of the services or non-termination of your membership after changes are posted or emailed constitutes your acceptance or deemed acceptance of the terms as modified.'

Late in the evening of 19 April 2017 (all times are GMT/UTC), the Platform automatically placed market orders to sell the assets of margin deficient accounts at the best available prices to repay ETH loans. Some of those orders were met by limit orders at 10 BTC to 1 ETH. There was no human intervention in this. It was all done by computers acting in accordance with their respective programs. The actual market price was .04 BTC to 1 ETH. So the trades were executed at 250 times current prices. This was a multi-million dollar mistake. The next day D discovered the “mistake” and reversed the trades. P sued D claiming a violation of their terms and conditions. D offered its risk disclosure statement which was uploaded prior to the trade but not expressly incorporated into the terms and conditions. D also claimed a mistake from the standpoint that D’s program had an “oversight in its design.” D noted that the trade was so obviously wrong the court must apply a “pragmatic and judicious stance” and void it. 

Evidence revealed that there were two trading platforms involved. P’s which took advantage of arbitrage trading and D’s which simply ran its exchange. P’s program allowed P to go in and override one size fits all parameters and as a safety valve, P input the 10 BTC to 1 ETH trades which were eventually executed by D. D suggested that P was opportunistic in seeking to take advantage of forced or erroneous liquidations by programming its trading software to place orders at prices that were nowhere near current market prices. P countered that there was always a possibility such orders would be filled and if they were, P would be bound by them. 

Issues

Rule of Law

Holding and Decision

Legal Analysis

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