Prepping for the worst: If an exchange fails is it better to hold BTC or fiat?

BTCisthefuture

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Quote from: coastermonger on February 05, 2014, 03:53:32 AM

Suppose you held funds in a bitcoin exchange. If the exchange is mismanaged and ends up closing without giving you the opportunity to withdraw, you'd understandably be pissed. You'd probably seek every possible means and every legal avenue in order to recover your funds, especially if it were for a significant amount.

The question is simple, if you're part of a lawsuit and making a claim, is it better to have been a person holding bitcoin? Or is it better to have been a person who had fiat at the exchange?

Good hypothetical question.

As of right now I'd say its better to have fiat simply because because there's already a lot of legal precedent there. Eventually though bitcoin related lawsuits concering holdings of bitcoin will become more common and normal, we aren't quite there yet imo.

DISCLAIMER: i'm not a lawyer, so what do i really know Grin

glendall

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There is a lot of talk about suing, but I imagine it is mostly ineffective.

You'd have to have A LOT of money on an exchange for it to be worthwhile to sue. I dunno, I'd say off the top of my head at least $75,000 USD, probably more like $200,000. Suing is mentioned a lot around these parts, but a:) it is really expensive b:) you have to pony up a lot of money that you are likely not going to get back [in a bitcoin related lawsuit) c:) Suing an exchange would be a nightmare, as it is probably based in foreign country for you. Like the idea of suing a guy in Belarus who runs a bitcoin exchange who claims he got hacked, is sort of laughable to me....good luck with that hypothetical premise. d:) Guy being sued can just go bankrupt and you'll not get your money back anyways.

I don't know much about the process but imagine it would be almost a long shot to sue and get your money back from an exchange, even if you knew who it was.

C. Bergmann

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Use exchanges you can easily sue. This means: Know the owner (know, he's a real person), look where it is located (at best in your country, at least in some country which is near and has juristical agreements, e. G. if you are an EU-citizen in the EU or in friend's countries like the swiss or norway). Than hold fiat and proof it (save every transaction you made).

If you want to run away cause an exchange faces trouble you should hold bitcoins. They are much easier to get out.

sickpig

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Quote from: coastermonger on February 05, 2014, 03:53:32 AM

Suppose you held funds in a bitcoin exchange. If the exchange is mismanaged and ends folding without giving you the opportunity to withdraw, you'd understandably be pissed. You'd probably seek every possible means and every legal avenue in order to recover your funds, especially if it were for a significant amount.

The question is simple, if you're part of a lawsuit and making a claim, is it better to have been a person holding bitcoin? Or is it better to have been a person who had fiat at the exchange?

In April 2013 bitcoin-24.com suddenly stop working, no more orders, no more withdrawals, back accounts freezed, a bug in the trading engine, a lot of naivety in the way the business was managed, etc. etc.

Luckily btc24 customers were able to get theirs btc funds back as early as 28th of April, on the other hand some have to wait almost a 10 months to get 72% of their fiat back. And still they're waiting to fetch the other 28% blocked in some fancy poland banking account.

Mind you there are a lot of other cases where the opposite applies. If you bother to search you'll find a lot of horror stories where btc funds simply have disappeared in a breath.

Anyhow, until effective distributed/decentralized exchanges will be up and running, just be extremely cautious.

If you really need to day trade just keep only the amount you need in the exchange account, not a satoshis more. Lastly: due diligence, you've to know with who you're dealing with (the exchange), look for red herrings, weirdness in the management etc. etc.

calian

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Gox: bitcoin, Bitfloor: cash, Bitcoinica: you're screwed.

glendall

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After losing money to Jon Montroll Bitfunder fiasco, where it looks like he treated all deposits as his personal wallet, I'm just not leaving any money in any exchange for a second longer than needed. I recommend you do the same. Sort a hard if you are a trader, but ya, any exchange can go down at anytime, don't keep a balance their if you can at all avoid it.

larem

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Quote from: davidpbrown on February 05, 2014, 04:03:36 AM

Don't hold large amounts in exchanges. Buy BTC and hold it for spending.

This. Anyone else holding your coins is putting you at risk.

davidpbrown

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Don't hold large amounts in exchanges. Buy BTC and hold it for spending.

If you are stuck already then Bitcoin is the better option, as it's more likely to get refunded in a timely manner. Fiat return would be naturally slow and might also give you a headache with bank v capital gains etc.

I don't see a difference from a legal standpoint, you'd have lost currency|commodity|something of value which would be an object the court considers as lost not the value of it, unless they then assessed for damages.

Lethn

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If you're talking purely about legality it's probably better to be holding fiat but there have been cases where judges have ruled in favour of people who have had their Bitcoins stolen regardless of what it is because in the end it's stolen property. Forgotten who it was that got sued, but I know there's an article out there that confirms this, it is going to depend on the judge being informed about Bitcoin though.

coastermonger

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Suppose you held funds in a bitcoin exchange. If the exchange is mismanaged and ends up closing without giving you the opportunity to withdraw, you'd understandably be pissed. You'd probably seek every possible means and every legal avenue in order to recover your funds, especially if it were for a significant amount.

The question is simple, if you're part of a lawsuit and making a claim, is it better to have been a person holding bitcoin? Or is it better to have been a person who had fiat at the exchange?

Topic: Prepping for the worst: If an exchange fails is it better to hold BTC or fiat? (Read 740 times)