(Updated Feb. 23, 2021: PDAX held a press conference discussing the issue.)
(Updated Feb. 22, 2021: Article is updated with recent news and development: PDAX issued second statement, PDAX customers, BSP said it is monitoring closely the incident.)
Philippine Digital Asset Exchange (PDAX) told BitPinas via email on Tuesday night, Feb. 16, 2021, that the platform has experienced a major outage, brought about by a surge in volume and increase in volatility. “Because of the recent surge in volume, we are experiencing outages, and as a result, PDAX is having to go on a longer maintenance period to ensure that we can scale the platform up and provide better service,” CEO Nichel Gaba told BitPinas in an email. The platform is live as of Feb. 18, 2021 but many users are still locked in of their accounts.
As of Feb. 22, 2021, new developments have emerged, including PDAX’s second official statement and comments from its customers. Below is a timeline of the events.
Table of Contents.
February 15, 2021
In an email advisory sent on February 15, PDAX said it will conduct a 1.5 hour system maintenance on Feb. 17, which would render the exchange and the mobile site unavailable while the system maintenance is ongoing.
February 16, 2021
Outage and Discrepancies
Around 7 am on February 16, PDAX customers began sharing on social media the discrepancies in their holdings. One user shared a screenshot, showing over Php 39 billion (roughly $801 million) in their portfolio. Other users have reported similar instances while others claimed to see some of their funds missing.
Users also reported and shared screenshots of the price of Bitcoin, which went down to Php 300,000 (around $6,000) on PDAX around the same time as the discrepancies in user funds and holdings.
By 8:40 am, PDAX announced it is conducting an emergency maintenance system.
When asked whether funds are safe, Nichel said they acknowledge all user concerns and that funds are safe. “Please rest assured that the funds are safe. We expect to re-enable the platform very soon so that our users can access their accounts and resume trading. Until then, we thank the community for their patience and understanding.”
February 17, 2021
PDAX Issued First Official Statement
On February 17, PDAX released an official statement, citing “unprecedented levels of trading and volatility” as the main cause of the outage. “In the coming days, we expect to roll out improvements that will shorten transaction times and improve the platform’s responsiveness.”
On the Facebook Group “PDAX Pinoy Bitcoin Community,” the official statement, however, appears to not have alleviated the concerns of PDAX customers. “Nakakalog in na pero wala pang trade under maintenance pa din,” said one user. When asked if their funds are there, the user said no.
Around 10 pm of the same day, PDAX announced that the maintenance has been completed.
February 18, 2021
Some Customers Were Locked Out and Asked to Return The BTC
Circulating on social media and on the Telegram group “Pinoy Crypto Community” is a post about a customer who was able to trade successfully outside of the expected market rates and proceeded to custodize the cryptocurrency, but they soon received an email from PDAX requesting them to return the Bitcoins.
“Good day! So yesterday morning started normally. I woke up and checked the PDAX trading platform then I saw a sell order for Bitcoin priced at only 300,000.00 per BTC (Price was currently @ 2,2,*.00 per BTC on other platforms). So I placed a Buy order for a small amount of BTC, the order was filled immediately and I managed to transfer the purchased BTC to another wallet outside Pdax just before they closed the trading and eventually the website. After almost 24 hours, they sent me a demand letter and SMS, requesting me to transfer back the BTC, which was purchased well within my rights without violating any laws or regulations of the trading platform, or they “may” be compelled to take legal actions against me.”
“Am I required to comply with their demands or was the purchase legitimate and legal, as I believe it to be?”
Here’s another email shared by a user:
February 20, 2021
Demand Letter Sent to PDAX
BitPinas received a messaage from Atty. Rafael Padilla, who is representing one of PDAX’s customers being asked to return the Bitcoins and still locked out of their accounts. (Disclosure: Rafael has regularly contributed articles and thought pieces to BitPinas.)
I was authorized by the client to disclose the legal engagement and I’m helping him pro bono. As of today, 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 the client’s account so that he can withdraw his funds there.Atty. Rafael Padilla.
Atty. Padilla commented on the issue on Facebook.
“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.”
“Our client had sufficient funds to cover for his purchase of BTC. That trade was executed, filled, and should therefore be considered as final. In fact, BTC, was delivered to him and he was able to withdraw them. PDAX cannot unilaterally reverse the transaction, so they’re locking him out and barring him from access to his funds to forced him to return the BTC.”
February 21, 2021
PDAX Issued its Second Official Statement
Nichel Gaba sent their official statement to BitPinas:
1. What happened
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 by 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.
2. What we did about it
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.
3. What was the impact and how we are correcting it
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.
4. Who we are working with
We are also working in close collaboration with government organizations and regulatory bodies like the Bangko Sentral ng Pilipinas (BSP) in full compliance of all policies, processes, and regulations.
5. Next Steps
By March 2021, we will be looking to triple our head count to further improve our service. Over the next two months we will be closely examining our corrections to ensure that every transaction made on the PDAX system is safe, accurate and compliant. We will continue to scale and improve every component of our platform, and continue to improve our services, again, in close coordination with our regulators. We will be closely updating everyone again on further developments. For any inquiries on this matter, you may reach us at firstname.lastname@example.org.
February 22, 2021
Nichel Appears on ANC, User Complaints Remain
Nichel appeared on ANC addressing the issue:
But many users are still locked out of their accounts, despite the CEO’s claims that 95% of the accounts have already been restored.
BSP: We’re monitoring it.
BSP Deputy Governor Chuchi Fonacier told the Philippine Star that PDAX has already submitted a report about the incident and that the BSP is closely monitoring the incident.
February 23, 2021
PDAX held a press conference
PDAX held a virtual press conference discussing the issue, more details about the “unfunded order”, and user concerns.
The outage on PDAX came at the backdrop of a new milestone for Bitcoin, having reached $50,000 or 2.4 million pesos on Feb. 16. Some users expressed concerns that they were not able to trade amid this new all-time.
BitPinas will be following this story as it unfolds.
This article is first published on BitPinas: Local Exchange PDAX Suffers Outage. What Happened?