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Ethan Lou: WonderFi’s Coinberry exchange lost 120 bitcoins and has yet to recover more than two-thirds of it
Toronto cryptocurrency marketplace Coinberry, owned by Kevin O’Leary-backed WonderFi Technologies Inc., says it has lost about $3 million in bitcoin due to a software glitch and has yet to recover two-thirds of it from hundreds of customers.
That loss of about 120 bitcoins, which has not previously been disclosed, is detailed in a recent lawsuit by Coinberry, filed in Brampton, Ont., west of Toronto. The case highlights the difficulties crypto companies face when dealing with an asset with irreversible transactions.
Coinberry’s lawsuit, which was filed in June, targets 50 customers and also names the world’s largest crypto exchange, Binance, because some people had allegedly transferred their bad bitcoin to that platform.
Coinberry, through WonderFi, declined to comment on the matter.
According to the lawsuit, which has yet to be tested in court, in 2020 Coinberry underwent a software upgrade and accidentally allowed people to buy bitcoin with Canadian dollars that had not yet been properly transferred to their accounts.
Customers could initiate an Interac e-transfer, have the amount credited to their Coinberry accounts, buy bitcoin and transfer the coins out, then cancel the original e-transfer, keep their own funds and get free bitcoin, Coinberry’s lawsuit said .
Coinberry fixed the problem, but more than 500 users had already exploited the vulnerability, according to the lawsuit.
“Coinberry contacted all of the aforementioned 546 affected registered users via email and demanded the return of the incorrect bitcoins,” the lawsuit said. “Coinberry also immediately contacted Binance.”
“Binance acknowledged that it had identified a quantity of the misused BTC and undertook to limit any access to the accounts,” the lawsuit said.
Binance declined to comment on the lawsuit, but said in a statement: “The company is committed to preventing bad actors from using the platform, which includes a world-renowned investigative team.”
It is unclear why Coinberry had resorted to suing Binance, given the latter’s apparent cooperation.
The lawsuit continued: “Coinberry was able to secure the return of approximately 37 of the misused bitcoins from 270 of the affected registered users.”
That leaves 83 bitcoins outstanding from about 270 other users.
The lawsuit concerned 63 of those bitcoins, including 9.48 units that were transferred to Binance. In a list that Coinberry provided to the court, everything was attributed to the 50 users named in the lawsuit.
That still leaves out 20 of the 120 bitcoins originally lost — and more than 200 of the 546 users who allegedly abused Coinberry.
Coinberry said the list of bitcoin abusers does not include people who have taken and not yet returned amounts below $5,000, valued as of May 2020.
It suggests that the majority of people who allegedly misappropriated Coinberry had done so in small amounts — more than 80 percent of those accused of taking bitcoin and not returning it had allegedly taken amounts under $5,000, adding together, their alleged catch comprises only a quarter of the total amount outstanding.
It is unclear how or if Coinberry is going after these individuals, given that they are not named in the lawsuit.
These 226 alleged small timers stand in stark contrast to some of the accused big fish in the lawsuit.
According to Coinberry, the largest amount misused by a single user and not returned was $385,722.31, valued in April 2022. It is attributed to two people – Jordan Steifuk and Connor Heffernan – who Coinberry says are actually the same person.
That person, whether Steifuk or Heffernan, could not immediately be reached for comment.
Coinberry is Canada’s first regulated crypto-only trading platform.
WonderFi, a Vancouver-based crypto outfit backed by Shark Tank personality O’Leary, acquired Coinberry in a $38.5 million deal in July.
In August, WonderFi, which had traded on the Toronto Stock Exchange, applied to list its shares on the US Nasdaq exchange.
Coinberry’s problems with its users are not uncommon in the crypto world. BlockFi, the crypto lender, once mistakenly deposited US$10 million of bitcoin into users’ accounts. OptiFi, a so-called decentralized exchange, said in August that it had accidentally shut itself down and that $661.00 worth of crypto was permanently locked up.
Ethan Lou is a journalist and author of Once a Bitcoin Miner: Scandal and Turmoil in the Cryptocurrency Wild West.
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