Coinberry says it lost $3 million in bitcoin due to a software glitch

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The Toronto cryptocurrency marketplace Coinberry, owned by Kevin O’Leary-backed WonderFi Technologies Inc., says it has lost some $3 million in bitcoin due to a software glitch and has yet to claw back two-thirds of it from hundreds of customers.

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That loss of about 120 bitcoins, which has not been previously disclosed, is detailed in a recent lawsuit by Coinberry, filed in Brampton, Ont., west of Toronto. The case highlights the difficulties faced by crypto companies when they handle an asset with irreversible transactions.

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Coinberry’s lawsuit, filed in June, targets 50 customers and also names the world’s biggest crypto exchange, Binance, because some people had allegedly transferred their ill-gotten 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, Coinberry in 2020 underwent a software upgrade and accidentally let people buy bitcoin with Canadian dollars that had yet to be properly transferred to their accounts.

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Customers could initiate an Interac e-transfer, get the amount credited to their Coinberry accounts, buy bitcoin and transfer the coins out, and then cancel the original e-transfer, retaining their own funds and getting free bitcoin, Coinberry’s lawsuit read.

Coinberry fixed the issue, but more than 500 users had already taken advantage of the vulnerability, according to the lawsuit.

“Coinberry contacted all of the said 546 affected registered users by email and demanded return of the misappropriated bitcoins,” the lawsuit read. “Coinberry also immediately contacted Binance.”

“Binance acknowledged that it had identified a quantity of the misappropriated BTC and undertook to restrict any access to the accounts,” the lawsuit read.

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Binance declined to comment on the lawsuit but said in a statement: “The company is committed to prevent 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 misappropriated bitcoins from 270 of the affected registered users.”

That leaves 83 bitcoins outstanding from about 270 other users.

The lawsuit was for 63 of those bitcoins, including 9.48 units that were transferred to Binance. In a list that Coinberry provided to court, all that was attributed to the 50 users named in the lawsuit.

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That still leaves out 20 of the 120 bitcoins originally lost — and more than 200 of the 546 users who had allegedly misappropriated from Coinberry.

Coinberry said its list of bitcoin misappropriation does not include people who have taken and not yet returned amounts under $5,000, valued in May 2020.

That suggests that the majority of the people who allegedly misappropriated from Coinberry had done so in small amounts — more than 80 per cent of those accused of taking bitcoin and not returning it had allegedly taken amounts under $5,000, and added together, their alleged haul comprises only a quarter of the total outstanding amount.

It is unclear how or if Coinberry is going after those people, given that they are not named in the lawsuit.

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Those 226 alleged small timers contrast sharply with some of the accused big fish in the lawsuit.

According to Coinberry, the largest amount misappropriated by a single user and not returned was $385,722.31, valued in April 2022. That is attributed to two people — Jordan Steifuk and Connor Heffernan — that Coinberry says are actually the same person.

That person, whether he is Steifuk or Heffernan, could not immediately be reached for comment.

Coinberry is Canada’s first regulated crypto-only trading platform.

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WonderFi, a Vancouver-based crypto outfit backed by Shark Tank personality O’Leary, bought Coinberry in a $38.5 million deal in July.

This August, WonderFi, which had traded on the Toronto Stock Exhange, applied to list its shared on the U.S. Nasdaq exchange.

Coinberry’s troubles 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 US$661,00 of crypto were permanently locked.

Ethan Lou is a journalist and author of Once a Bitcoin Miner: Scandal and Turmoil in the Cryptocurrency Wild West.  

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