Crypto.com was supposed to send a customer a refund of a mere $100. Instead, the exchange accidentally sent her account about $10.4 million due to a clerical error. About seven months later, the exchange audited its accounts, and it discovered the drastic mistake. To recover the funds, Crypto.com has gone to court. In the interim, the customer had already used and transferred some funds to others.
Facts of the Case
In May 2021, the cryptocurrency exchange Crypto.com—which hired Matt Damon for its Superbowl commercial—accidentally wired an Australian woman about $10.4 million. This woman did not return the funds but instead used the money to buy a mansion for her sister in Melbourne.
The exchange had meant to send the woman a $100 refund. Thevamanogari Manivel gave some of the money to six other people, including her sister and daughter.
However, Crypto.com did not immediately catch this blunder. It wasn’t until seven months later that the exchange discovered the error during a routine audit.
It then decided to go to court to retrieve the money. Thus, Crypto.com sued Manivel and the six others who transferred the money to recover the funds.
The lawyers for Crypto.com argued that Manivel transferred almost $1 million to her sister’s account to purchase a four-bedroom house in Melbourne. The exchange then discovered that the property was formally transferred to Manivel’s sister—Thilagavathy Gangadory—who lives in Malaysia.
Complicating matters further, the money had been moved around to other people, which made it very hard for the company to proceed with recovery options such as freezing Manivel’s account.
Several court documents were filed, including the ruling and conclusion. Specifically, towards the end of August, the exchange won a court ruling. The judge ordered Manivel and her sister (“the defendants”) to repay all the money and cover the legal expenses plus 10% interest—amounting to about $27,000 as an additional expense.
The judgment also notes that Crypto.com initiated proceedings against eight other people to recover the rest of the funds.
Not a Good Time for Crypto.com
This could not have come at a worse time for Crypto.com. As if dealing with a drastically erroneous payment and the ongoing lawsuit wasn’t enough, Crypto.com is still facing human resource issues and other payment issues.
In June, Crypto.com had to lay off about 260 employees, equating to 5% of its workforce. CEO of Crypto.com Kris Marszalek (@kris) noted in a Twitter post that these “targeted reductions” was difficult but necessary “to ensure continued and sustainable growth for the long term.”
Following these cuts, the exchange then went through another round of layoffs. These layoffs involved letting hundreds of employees go, though this has not been a publicized event—making it hard to estimate the exact number of people who were forced to leave the company. CEO Kris Marszalek has refused to provide an exact number.
Further, Crypto.com is amid ongoing payment obligations, notably involving a naming rights deal of $700 million to the Staples Center in Los Angeles—home to the LA Lakers.
Reflection and Looking Ahead
Everyone knows that crypto transactions are volatile and risky. They are volatile because the markets constantly fluctuate in price and popularity. They are difficult because crypto transactions are not reversible.
That said, centralized exchanges may be able to reverse certain transactions if the transfer was made in error or with fraud. The problem with this case involving the Australian woman is that the error was not discovered until seven months later. As a result, the money had already been spent, used, transferred, and moved around to multiple individuals.
Therefore, Crypto.com had minimal options. Most critically, freezing the woman’s account was out of the question. The only viable option appeared to be a lawsuit.
As for the next steps in the case, the judge will give further instructions beginning in October.
The Australian woman who received $10.4 million from Crypto.com instead of $100 due to a clerical order must now pay back everything—including legal expenses and interest. The only thing complicating matters is that the woman had spent and transferred the money. Even though the judge handed Crypto.com the win, the court will reconvene in October to discuss the next steps.