What Really Happened to PDAX?

Last Wednesday, 17 February 2021, we published an article related to the outage of PDAX as Bitcoin hits an all-time high of US$50K. Philippine Digital Asset Exchange (PDAX) is a Bangko Sentral ng Pilipinas (BSP) licensed virtual currency exchange with Nichel O. Gaba at its helm as CEO.

In a statement emailed to me by PDAX, they stated:

“On February 16, 2021 our system was hit by an unprecedented surge in transactions, which caused it to experience significant maintenance issues. PDAX transactions grew to 70x over the past months, and we note that at this pace, other exchanges such as Coinbase and Kraken have also experienced recent outages. The pandemic has led to massive shifts in online financial behavior; beyond what our growth models predicted.

We immediately suspended the system to prevent any issues, to find and isolate the problem, and improve our ability to operate safely at this level of scale. This process took 36 hours. This is quite a long time for a trading platform to be down and is very frustrating to our clients who couldn’t access their accounts during that period. We are very sorry it took that long, but this happened suddenly and had to be addressed right away to safeguard user accounts and protect the integrity of the market.

As a result of the incident there was an isolated unfunded order, which found its way onto the system and affected the accounts of other users. We identified and invalidated the order and the subsequent chain of unfunded transactions. We are in the process of restoring the affected accounts back to their original balance before the Feb. 16 incident. We have already restored 95% of the accounts and expect to complete the rest by Feb. 22. We are also in communications with our users and members to address their concerns and render assistance they may require.

Our priority is to minimize further risks and preserve the integrity of the Filipino Crypto Trading Market by ensuring the assets of our users remain whole, safe and secure.”

Upon checking, for the last 30 days, Kraken has an uptime of 99.31% while Coinbase was up 100% since December 2020 according to the exchanges’ respective status websites. The recent outage of PDAX started from the morning of 16 February 2021 until 17 February 2021.

Prior to the release of this statement from PDAX, which I received via email just before lunchtime of Saturday, 20 February 2021, Gaba agreed for me to have an interview with him but did not materialized. He, instead, promised that the company will issue a statement yesterday, Friday, 19 February 2021 at 4:00 PM.

There have been several reports circulating on the interwebs about people who managed to purchase Bitcoin via PDAX at a much lower price (some claiming that they were able to buy at PHP300K when the BTC price at that time was more than PHP2M) before the exchange’s outage. Some are even claiming that PDAX sent them an email and SMS asking for the return of the BTC that they purchased. According to the PDAX Terms of Use published 21 January 2019: “Orders, once executed, are final and irreversible.”

So, was this a case of a “fat-finger” error? A fat-finger error is a keyboard input error or mouse mis-click – something not new in financial markets.

As of this writing, there are still quite several PDAX users who are unable to login with their accounts. One user reached out to me asking for help, as he has more than PHP300K worth of assets currently with PDAX. He is losing money as he is unable to trade since his account is one of those still locked up by the exchange – with no ETA when he will be able to make transactions again – while the price of cryptocurrencies continues to surge.

In the same statement, PDAX added that they are working in close collaboration with the BSP, and assured its customers a more safe, accurate, and compliant system by adding manpower (triple of their existing headcount) by March 2021.