PDAX 2% asks: ‘What do you mean by unfunded transactions?’

Published February 26, 2021, 9:42 AM

by Robert "Bob" Reyes

During my interview with Philippine Digital Asset Exchange (PDAX) CEO Nichel O. Gaba last Saturday, he promised that all users will gain access back to the exchange by Monday, 22 February 2021. As of Wednesday, 24 February 2021 10:00 AM — more than a week since the prolonged outage of the exchange — there are still 225 affected accounts that are still locked out of PDAX, according to an advisory sent to users. The controversial cryptocurrency exchange cites “complicated transactions” and “extensive reconciliation process” as the reason why some users are still unable to use their funds and assets.

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Quite a number of their clients (more or less 2% of its total userbase) are still asking when will they finally regain access to their accounts more than a week after the so-called system glitch? Some of these users feel that PDAX is taking their accounts hostage as some of them being asked to transfer the cryptocurrencies that they hold to a wallet address controlled by the exchange.

During the live interview conducted by Manila Bulletin Tech News Editor Art Samaniego aired by Tech News Online FB page last Tuesday, 23 February 2021, the PDAX CEO remains firm that some of the transactions made before the so-called systems glitch were unfunded.

“When we discovered that an unfunded order made it to the system, we took the exchange down to prevent that order from affecting other accounts,” according to Gaba. While acknowledging the concern and anxiety that PDAX users felt during the downtime, Gaba reiterated that the 36-hour system check was necessary to “protect them, the public, and the integrity of the market.”

Users began to ask: what “unfunded sell” or transaction is Gaba talking about? How can an “unfunded sell” or transaction push through in a decentralized exchange like PDAX?

Between 22 February 2021 and 7:00 PM of 23 February 2021 – the time an advisory was posted — only six (06) user accounts were reinstated by the exchange.

Users File Complaints with the BSP

Fintech lawyer Atty. Rafael Padilla, acting on behalf of his client – a PDAX user still currently locked out of his account – has filed a formal complaint with the Bangko Sentral ng Pilipinas (BSP) against PDAX. They are requesting BSP’s Consumer Empowerment Group to look into the unlawful withholding of client funds by Fyntegrate, Inc. – owner and operator of PDAX.

“We have sent PDAX an actual demand letter (not like the email “Demand Letter” sent by PDAX Customer Support to imply some legal threat on their users) urging them to enable our client’s account so that he can withdraw his funds there. He is being locked out from his account until he transfers the BTC that PDAX wants to be returned. Our client’s trade transaction was legitimate under applicable laws, decided cases, and of course according to PDAX’s very own terms and conditions/user agreement,” according to Atty. Padilla.

“Our client had sufficient funds to cover for his purchase of BTC. That trade was executed, filed, and should therefore be considered as final. In fact, BTC was delivered to him and he was able to withdraw them,” added Atty. Padilla.

I still have to receive a reply from the BSP on the email I sent over the weekend asking for comments on issues related to PDAX.

The SEC Advised of the Complaints, Too

Another PDAX user who complained with the BSP was referred to the Enforcement and Investor Protection Department of the Securities and Exchange Commission (SEC). According to an email sent by the BSP to the complainant: 

“The indicated company (PDAX) is not among the institutions supervised by the BSP, but is under the jurisdiction of SEC.”