## Facts

- B2C2 Ltd. was an electronic market maker that traded cryptocurrencies through a deterministic algorithm written by its owner and programmer, Maxime Boonen.
- To manage periods of uncertain or missing market data, B2C2’s algorithm included pre-set “deep prices” designed to ensure trades would only execute at rates favorable enough to justify execution in abnormal conditions.
- Quoine Pte. Ltd. operated a Singapore-based cryptocurrency trading platform that enabled users to trade cryptocurrencies (including Bitcoin (BTC) and Ethereum (ETH)) against each other.
- Quoine also used software that drew on external market price feeds so that prices on its platform would track broader market prices.
- In April 2017, Quoine experienced a system problem affecting its pricing inputs, and its platform prices no longer aligned with the wider market.
- After the pricing problem, Quoine ran a process that forced certain traders’ positions to be sold, based on Quoine’s assessment that those traders lacked sufficient collateral.
- On April 19, 2017, in connection with that forced-selling activity, B2C2’s algorithm filled seven ETH/BTC trades on Quoine’s platform at about 9.99999 or 10 BTC per 1 ETH, far above the prevailing market rate (about 0.04 BTC per 1 ETH).
- The platform’s systems treated the orders as matched and filled, and the corresponding BTC and ETH account entries were made, resulting in a large profit to B2C2.
- The next day, after Quoine’s CTO reviewed the transactions and considered the prices highly abnormal, Quoine cancelled the seven trades and reversed the corresponding debits and credits on the platform.
- B2C2 sued for breach of contract and breach of trust, relying on Quoine’s platform terms stating (in substance) that trades were irreversible once orders were filled.
- Quoine defended on the basis of mistake, arguing that the trades were executed at prices so far from the real market price that the automated programs did not reflect the parties’ true intent and the contracts should be treated as void or voidable.

## Issues

1. Did Quoine’s platform terms and conditions permit Quoine to cancel and reverse trades after they were matched and filled?
2. Were the seven contracts formed on April 19, 2017 void or voidable for unilateral mistake and/or common mistake, given that formation occurred through deterministic algorithms?
3. In applying mistake doctrines to algorithmic contracting, whose intention and knowledge are legally relevant (the software’s “state” or the humans who designed and deployed it)?
4. Did Quoine hold the cryptocurrencies credited to users’ accounts on trust, and if so, did reversing the trades breach that trust?
5. If B2C2 succeeded on liability, was it entitled to specific performance (restoration of the crypto positions) or only damages?

## Decision

- The court held that the platform terms did not give Quoine a general power to cancel and reverse fully executed trades simply because the price was abnormal or because Quoine later regarded the trades as erroneous.
- The court found Quoine breached its contract with B2C2 by cancelling and reversing the seven filled trades contrary to the platform’s terms on finality/irreversibility once orders were filled.
- The court rejected Quoine’s mistake defences on the facts, holding that the executed trades were not shown to be void or voidable for unilateral mistake or common mistake.
- The court held that Quoine held cryptocurrencies in users’ accounts on trust for those users, and that Quoine’s reversal of the credits and debits arising from the seven trades constituted a breach of trust.
- Although B2C2 established liability for breach of contract and breach of trust, the court refused specific performance and held B2C2’s remedy lay in damages rather than an order compelling Quoine to restore the particular quantity of cryptocurrency.

## Legal Principles

- A platform operator must act within the powers granted by its written terms; absent a contractual right to unwind completed trades, reversing matched and filled transactions is a breach of contract.
- Contracts formed by deterministic trading algorithms are assessed using ordinary contract principles; the relevant intention is attributed to the human actors who create and deploy the algorithms, not to the software as an independent decision-maker.
- Unilateral mistake does not void or avoid a contract merely because the price is extreme; the party seeking to set aside the contract must show the counterparty had the required form of knowledge of the mistake (or comparable fault) under the applicable doctrine.
- Common mistake requires a shared, fundamental mistaken assumption that makes performance essentially different from what the parties agreed; an abnormal price caused by interacting automated systems did not, on these facts, meet that standard.
- Cryptocurrencies (such as BTC and ETH) can be treated as assets capable of being held on trust; where an exchange holds or controls customers’ cryptocurrency balances, it may do so as trustee depending on the legal and factual arrangement.
- Even where breach of contract and breach of trust are proved, specific performance is discretionary; the court may deny it and award damages instead, including where monetary relief is an adequate substitute and an order to transfer particular crypto is not appropriate on the facts.

## Conclusion

In B2C2 Ltd. v. Quoine Pte. Ltd., the SICC held that Quoine breached its platform contract by cancelling and reversing seven matched and filled ETH/BTC trades executed at an extreme price after a platform pricing problem, rejected Quoine’s attempt to avoid the trades for mistake in an algorithmic trading setting, found that Quoine held users’ crypto on trust and breached that trust by reversing the account entries, and awarded B2C2 damages rather than specific performance.


B2C2 Ltd. v. Quoine Pte. Ltd., [2019] SGHC(I) 03