Coinbase has hinted that it may sue approximately 1,000 users in Georgia for taking advantage of a price flaw.
According to a representative, the amount of money lost by Coinbase as a result of the Georgia mistake was "immaterial."
Nonetheless, "Coinbase is working with law firm Gvinadze & Partners to assist in retrieving the improperly credited funds," the rep said.
On Aug. 29, over 1,000 Coinbase customers in the country straddling Europe and Asia took advantage of the "arbitrage opportunity" when the lari, the local currency, was priced at $290 rather than $2.90 on Coinbase for about six hours.
"We cannot comment on the status of specific demands or litigation," the company representative said. "However, users that return the improperly credited funds will not be subject to further legal proceedings."
The host of the Georgian television program "Crypto Bazari," Avtandil Kutchava, told CoinDesk that roughly 470 people contacted his staff regarding the issue. Kutchava calculated that dealers could have profited tens of millions of dollars overall on trades using the incorrect lari rate, and on that day, ATMs in Tbilisi, the capital of Georgia, ran out of banknotes as traders scurried to cash out their staggering winnings.
On a group video chat, CoinDesk spoke with four traders who profited from that pricing error. Hours after they exchanged cryptocurrency for lari and deposited cash into their bank accounts, they all claimed that their bank accounts were briefly suspended.
The accounts and bank cards were unfrozen a few days later with no action from them.
However, on Sept. 24, all four users received emails from Gvinadze & Partners stating that "Coinbase is determined to use any and all available legal means to recover improperly credited funds as soon as practical" and threatening legal action if they did not respond to the email and return the money.
Coinbase did not clarify whether the exchange contacted Georgian banks to request that traders' accounts be frozen. According to the traders, at least two of Georgia's main banks, Bank of Georgia and TBC, froze the accounts of users who took advantage of the malfunction but later unfroze them.
A text message from one of the traders' bank was cited by the news site Blockworks. One bank sent out a general text message to consumers saying, "Hello, we have marked your transactions with Coinbase as suspicious and we're locking all your accounts and cards. Please be aware that Coinbase may request clawback of the funds. Sorry."
