B2C2 Ltd v Quoine Pte Ltd
Jurisdiction | Singapore |
Court | International Commercial Court (Singapore) |
Judge | Simon Thorley IJ |
Judgment Date | 14 March 2019 |
Neutral Citation | [2019] SGHC(I) 3 |
Citation | [2019] SGHC(I) 3 |
Published date | 28 May 2020 |
Plaintiff Counsel | Danny Ong, Sheila Ng and Jason Teo (Rajah & Tann Singapore LLP) |
Defendant Counsel | Paul Ong, Ivan Lim and Marrissa Karuna (Allen & Gledhill LLP) |
Date | 14 March 2019 |
Hearing Date | 21 November 2018,28 December 2018,22 November 2018,23 November 2018,26 November 2018,29 November 2018 |
Docket Number | Suit No 7 of 2017 |
Subject Matter | Mistake,Contract,Breach of trust,Breach,Mistake of fact,Trusts |
This is an action for breach of contract and breach of trust. The Defendant (“Quoine”) is a Singapore-registered company which operates a currency exchange platform (the “Platform”) enabling third parties to trade virtual currencies for other virtual currencies or for fiat currencies such as Singapore or US dollars. The two virtual currencies (sometimes referred to as cryptocurrencies) involved in this action are Bitcoin (“BTC”) and Ethereum (“ETH”).
The Plaintiff (“B2C2”) is company registered in England and Wales trading
In recent years, there has been a significant growth in virtual currencies of which Bitcoin is perhaps the best known. They are not linked to any particular country nor regulated by any central monetary authority. They are traded for other virtual currencies or traditional currencies on computer networks such as the Platform.
B2C2’s claim arises out of an incident that occurred on the Platform on 19 April 2017 when, as a result of a series of events which I shall consider in more detail below, seven trades for the sale by the Plaintiff of ETH for BTC at an exchange rate of either 9.99999 or 10 BTC for 1 ETH were effected by the Platform. This was at a rate approximately 250 times the rate of about 0.04 BTC for 1 ETH which had been the previous going rate. The proceeds of the sale (3092.517116 BTC) were automatically credited to B2C2’s account by the platform and the corresponding amount of 309.2518 ETH was automatically debited from that account.1
When Mr Mario Antonio Gomez Lozada (“Mr Lozada”), the Chief Technology Officer (“CTO”) of Quoine, became aware of the trades the following morning, he considered the exchange rate to be such a highly abnormal deviation from the previously going rate that the trades should be reversed. Accordingly, the seven trades were cancelled by Quoine and the debit and credit transactions were reversed.
B2C2 contends that Quoine had no contractual right unilaterally to cancel the trades once the orders had been effected and that its action in so doing was in breach of the version of the Terms and Conditions which regulated the trading relationship between Quoine and B2C2 at the material time. Additionally, B2C2 contends that Quoine holds the proceeds of B2C2’s account on trust for B2C2 and that the unilateral withdrawal of the BTC which had been credited to the account as a result of the trades was in breach of trust.
The writ was issued in the Singapore High Court on 18 May 2017, the Statement of Claim was served on that day and the Defence on 16 June 2017. With the agreement of the parties, the action was transferred to the Singapore International Commercial Court on 24 August 2017 and came on for trial before me on 21 November 2018.
There was an application for Summary Judgment under Order 14 of the Rules of Court (Cap 322, R 5, 2014 Rev Ed). I dismissed this application in a judgment delivered on 27 December 2017: see
There are a large number of trading platforms around the world and some of these provide for trading in virtual currencies. At a high level of generality, they operate in the same way. There are two types of traders, market makers and investor-traders. An investor-trader, as its name suggests, is a person who purchases a given commodity with a view to holding it for a period of time in the hope that its value increases so that it can be sold at a profit.
Market makers are more regular traders who provide liquidity to a given platform by quoting orders (both buy and sell orders) and seek to generate income by capturing what is known as the bid-ask spread. B2C2 is a market maker. Market makers will trade over a number of platforms (in B2C2’s case at the relevant time it was trading on 15) and do so by using sophisticated algorithmic trading software. At any one time a market maker may be seeking to sell a given currency on one exchange and buy it on another or, indeed, on the same exchange. The software monitors the trader’s position over all the platforms to regulate the exposure to any given currency and there will therefore be times when no buy quotes for a given currency are being placed on any of the platforms because the software has determined that the trader is over-exposed in that currency and is therefore, for the time being, only going to be a seller. The reverse can obviously also be the case.
Market makers can on occasions also be investor-traders but this action is concerned with B2C2’s activity as a market maker. Of more relevance is the fact that operators of currency exchange platforms can also trade as market makers on their own platform as Quoine did in the present case.
Whilst there are a number of ways in which an order can be placed on a platform, there are two types of orders that are material in this dispute:
As Mr Maxime Boonen (“Mr Boonen”), a director of B2C2, explained in his affidavit of evidence-in-chief (“AEIC”), B2C2 acted as a market maker on the Platform in the following manner:2
The Platform[emphasis in bold in original]
Quoine was cofounded by Mr Lozada together with Mr Mike Kayamori in 2014. It operates platforms in Japan and in Singapore. The Platform functions in the following way:3
The Platform uses order books to record orders from buyers and sellers for each pair of currencies being traded on the Platform. An order book is essentially an electronic ledger containing...
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