Coinbase bug allowed Traders to Sell Crypto for 100 times the Price

Coinbase bug allowed Traders to Sell Crypto for 100 times the Price

 

Whenever some major problem occurs with a Cryptocurrency Exchange platform, we generally read about it everywhere the in a blink of an eye. This is not a good press for Cryptocurrency Exchange platform, so they always try to not let the news get out but usually, they fail to do so. So, it is quite astonishing that today we are not reading about the things that went down on 30^th August, on Coinbase Exchange.

 

First reported by investfox.com, on 30^th August, the Coinbase Exchange had a major technical bug that gave traders a slight window to sell off their cryptocurrencies for 100 times the price. This technical bug occurred for those who used GEL (Georgian national currency) as their trading currency. Traders who had Cryptocurrency prices and their wallet balances displayed in GEL saw that their balances were showing astronomical prices.

 

So, what exactly happened? Coinbase Exchange is a US-based cryptocurrency exchange that primarily uses USD as the default fiat on their exchange, but they also allow traders to display balances in different currencies for traders convenience. For this, they need to implement exchange rates of different currencies with USD, and that is where the technical error occurred. On 30^th August, the average exchange rate of USD and GEL was 1 USD for 2.88 GEL, so if traders had 10 USDC in their accounts and wanted to sell it for GEL, they should have received 28.8 GEL based on the exchange rate. But in fact, traders were able to sell 10 USDC for 2880 GEL. 

 

 

Here, we can easily see where the technical bug occurred. Coinbase Exchange had a technical error that caused the exchange rate of USD and GEL to be set as 1 USD for 288 GEL. This was not present for only USDC, but every single Digital Currency on Coinbase Exchange was priced for 100 times more than the market price. 

 

Also Read: What Is Coinbase? | How To Use Coinbase Account

 

Traders were able to leverage this mistake and sell huge quantities of digital currencies on Coinbase Exchange for astronomical prices. Most of these traders transferred their cryptocurrencies from different exchanges to Coinbase exchange and sold them there. It is still to be known how much money exactly has Coinbase Exchange lost following this technical bug, as they still remain muted regarding the issue and no comments have been issued. 

 

On the traders side, things are also not as upright as you might think. Following these huge deposits, most Georgian banks started flagging the transactions as suspicious movements and stopped accepting any more deposits from the Coinbase Exchange. This response from banks was really fast and because of that, a lot of traders did not manage to withdraw funds from Coinbase Exchange Accounts. Shortly after this, banks started to freeze accounts that received payments from Coinbase exchange. Reports suggest that this was initiated by banks themselves and not following the request from Coinbase Exchange. 

 

Also Read: Coinbase Reveals It Will "Evaluate Any ETH Fork Tokens Following The Merge"

 

Following these developments, Georgian traders who managed to take advantage of this bug became vocal and demanded that their accounts be unfrozen. The main issue here is that banks freeze accounts and not the funds received, so traders cannot access other funds they had in their accounts. Another cause for this outrage from traders is that they believe that they have done nothing wrong and the money they made legitimately belongs to them, and they have quite good reasons for that. 

 

One reason is that this is a financial exchange, and they were offering to pay certain money for certain digital assets. Combine this with one of the most famous trading strategies, arbitrage trading, which is when you find price differences between two same currencies at a different platform and take advantage of that difference to book profits, and we see where they are coming from. Georgian traders believe that they have not done anything illegal and just followed the legal and accepted trading strategy of arbitrage. 

 

Also Read: Compliance And Personal Information Protection

 

So, we still have to see what awaits these traders. Will they keep the money they made, or will Coinbase Exchange manage to convince banks to refund transactions? All that is left for such traders to do is be patient for further developments.