After Losing $3 Million Worth Of Bitcoin, Coinsecure Plans To Compensate Users

This past week, Coinsecure lost a little more than $3 million worth of BTC from its bitcoin wallet. Reports indicate that Coinsecure’s CEO is asking the New Delhi police to seize the passport of the exchange’s chief security officer, who is suspected of masterminding the theft. If unable to recover the cryptocurrency, Coinsecure plans to compensate customers with existing reserves using the price of bitcoin on April 9, 2018.

  • Cryptocurrency trading is not as popular in India as it is in much of the rest of the world, but New Delhi is suddenly the setting for one of the most extraordinary bitcoin investigations yet. In the past week, cryptocurrency exchange Coinsecure was victimized to the tune of 438.32 BTC. At current prices, that equates to just over $3.5 million.

    In a nutshell, the exchange‘s CEO, Mohit Kalra, has accused his chief security officer, Amitabh Saxena, of stealing customer funds. For anybody interested in tracking the action on the bitcoin blockchain, the primary wallet address associated with the (possibly) misappropriated coins is 1BaEJquitskdXcTj53Uy6PuUtJ5a8ETWpA.

    In the event that Coinsecure cannot reclaim the missing bitcoin, the exchange plans to provide payouts to users in a mix of bitcoin and Indian rupees, using the prices quoted on Monday, April 9, 2018. The payout would be 10 percent in bitcoin and 90 percent in rupees, which means that (at current prices) customers would eat an approximately 12 percent loss on their holdings. The exchange has yet to provide the exact “lock in rate” that it will use for reimbursement.

    The Math

    According to CoinMarketCap, the global bitcoin price on April 9 fluctuated between $6,661.99 and $7,178.11. If we take a simple average of the day’s high and low (not accounting for trading volume at various prices), we can estimate that the global price was approximately $6,915.05 per BTC.

    Now that BTC is trading at $8,000 per unit, Coinsecure users have missed out on significant price gains. Even if they receive 10 percent of the initial holdings in BTC, they will see a loss. This is calculated as follows:

    Note: For the sake of simplicity, let’s assume that a customer had just one bitcoin (1 BTC) in their wallet.

    10 Percent of Compensation in BTC (using current prices)

    0.1  BTC * $8000 per BTC = $800

    90 Percent of Compensation in Rupees (using April 9 prices)

    0.9 BTC * $6,915.05 per BTC = $6223.545

    Final Holdings with Compensation: $800 + $6,223.545 = $7,023.545 (equalling 459,628.89 INR)

    Estimated Loss

    $8,000-$7,023.545= $976.46

    This means that even in the event of compensation, this customer would have missed out on approximately $976.46 in gains due to the theft. Overall, customers will have only 87.79 percent of what their holdings would have been worth if the bitcoin had not disappeared from the exchange‘s wallet.

    It should also be noted that under the suggested payout schema (90 percent rupees, 10 percent BTC), customers could conceivably make money on the transaction if the price of bitcoin dips below $6,915. However, if the price of bitcoin is lower than it was on April 9, then Coinsecure would be better off compensating customers exclusively in BTC. It’s all a numbers game.

    As ETHNews reported earlier this month, the Reserve Bank of India has prohibited regulated entities from working with businesses or individuals dealing with cryptocurrencies.

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