The largest crypto exchange in Southeast Asia, Philippine Digital Asset Exchange (PDAX), experienced a technical failure that led to an 88% discount on Bitcoin's price and a freeze on 5% of user accounts.
On February 18, reports surfaced on social media of customers being locked out of their exchange accounts and being asked to “return their Bitcoin” to the exchange, threatening legal action. We later find out, PDAX was selling bitcoin for as low as $6,000 on the exchange, at no fault of its users, and whales were buying up the underpriced assets. This led to Bitcoin trading at 88% below price for a few minutes before a halt was placed on trading.
“After almost 24 hours, they sent me a demand letter and SMS, requesting me to transfer back the BTC, or they may be compelled to take legal action,” said one trader who believed his purchase was well within his rights.
The fiasco finally ended with a whale buying equivalent of $12.9 billion in bitcoin at the discounted price before the exchange went down for indefinite maintenance. Others reported being trillionaires. It's hard to imagine the size of some of these faulty purchases — some being 10X larger than Tesla's entire stake in bitcoin, pointed out one user on Twitter.
According to the exchange's CEO Nichel Gaba, the system error was not due to a hack but a technical glitch caused by a massive surge in trading.
“It’s very understandable that a lot of users will feel upset they were able to buy what they thought an order was there for Bitcoin at very low prices," he said in a brief press conference to Yahoo, "but unfortunately, the underlying Bitcoins were never in the possession of the exchange, so there’s never really anything there to be bought or sold, unfortunately.”
Gaba also added that they identified and canceled all the orders presented at the incorrect $6,000 price that has crippled the exchange.
Rafael Padilla, an attorney representing some of the affected users, claims that PDAX has opted to lock users out of their accounts because it cannot unilaterally reverse the transactions. "Our client’s trade transaction was legitimate under applicable laws, decided cases, and of course according to PDAX’s very own terms and conditions/user agreement,” he said to Yahoo.
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