Bitcoin Market says it has no bitcoins

O Bitcoin Market (MB), Brazil’s largest cryptocurrency broker, said in a lawsuit in São Paulo state that it does not own bitcoins. The information was discovered in a case involving the Livecoins gained access.

In summary, Mercado Bitcoin appealed a decision in favor of a user who claimed to have suffered fraud on his account, resulting in the loss of 0.17 bitcoins.

The author claims to have been the victim of a hacker attack in 2020, which allowed irregular movements on his investment account, including withdrawals of bitcoins and reais. He requested the return of the stolen bitcoins and disputed all transactions.

In response, Mercado Bitcoin acknowledged the fraudulent transactions, but placed the blame on the user.

Mercado Bitcoin’s defense argued that its platform has several security measures in place to protect user accounts, including two-factor authentication, confirmation of transactions by email, and the use of a unique login and password.

The company claimed that all of these measures were active and used in the transactions surveyed, indicating that the account access was legitimate.

The MB also mentions case law regarding phishing cases, which shows that similar situations were considered to be the fault of the user or third parties, and not of the financial institution or platform involved.

“We don’t have bitcoins,” says Mercado Bitcoin

The first decision in the case ordered Mercado to pay Bitcoin BRL 9,963.59 to the author, with monetary correction from the date of the facts and interest from the date of service.

However, Mercado Bitcoin opposed the decision, claiming that the company had no participation in the facts described in the case. and that there was no disruption in service.

In addition, the broker claimed that the transactions carried out on the customer’s account were carried out using his personal password and confirmed by email, indicating that all security measures implemented by the company had been followed.

By refusing to return the amount in bitcoin to the customer, the Bitcoin Market argued that it neither owns nor ‘manufactures’ any assetsmaking the platform only available to users.

It is worth remembering that cryptocurrency brokers can have their own Bitcoin reserves, but this does not appear to be the case with Mercado Bitcoin, which stated that it has no assets, suggesting that the company has no reserves of its own.

“The inability to meet a possible conviction and return the author’s values ​​in bitcoins is precisely due to the fact that the suspect does not have assets and does not ‘manufacture’ them, as it only provides a platform for the users can transact among themselves.” says MB.

Mercado Bitcoin also argued that unlike banks, it does not transact on its customers’ assets and does not own the assets traded on its platform.

“Therefore, Bitcoins have already been sold and “pulverized” on the market, and their return “in kind” is not feasible. – said the defense of Mercado Bitcoin.

Therefore, according to the broker, it would not be possible to order him to “return” the bitcoins withdrawn from the author’s account, as these assets were sent to a wallet outside the Mercado Bitcoin system.

In other words, the exchange claims that once the bitcoins were transferred out of the system, they became inaccessible and thus they cannot be returned due to the decentralized and irreversible nature of cryptocurrency transactions.

The defense therefore explains the basic workings of bitcoin transactions, but paves the way for users and industry experts to question their reservations.

According to Rafael Souzalawyer specialized in cryptocurrencies and digital law, although the legal framework for cryptocurrencies does not require brokers to maintain reserves in cryptocurrencies, It is essential for the reliability and transparency of these brokers to demonstrate their financial strength.

“Maintaining a reserve of crypto assets is crucial to compensate customers in the event of cyber attacks. The safety of customers’ assets is a priority, and evidence of robust financial reserves is the most effective way to ensure this protection.” – said Souza.

In an industry known for its volatility and risks, clear separation of funds is seen as a hedge against potential problems. This approach therefore has significant consequences for investor confidence.

When a broker demonstrates that it has reserves, it provides a layer of security that can be crucial for attracting and retaining users.

This is especially important in a scenario where cases of fraud and bankruptcies on cryptocurrency platforms are frequent news.

In other words, if the exchange is hacked, where would be the reserve to refund users?

For example, in 2023 there will be several brokers, such as the giants Poloniex, MuntEx It is Huobi were attacked, with each resorting to their own reserves to deal with the situation. In no case did the companies suggest that they did not have their own assets.

Jefferson Randolfocryptocurrency expert and partner at KriptoBr, says Livecoins It is surprising to read such a comment, since in the world of cryptocurrency brokers, who even act as intermediaries, it is a common and essential practice to secure bitcoins and other cryptocurrencies by storing them offline on specialized devices .

“This approach has been a critical part of these brokers’ core operations for more than a decade, a precaution that is especially relevant given the frequent reports of intrusions and hacks on industrial platforms. The question then arises: how can a broker recover financially after a cyber attack? That is why we at KriptoBR have been consistently emphasizing for more than six years the importance of not leaving cryptocurrencies in the custody of third parties, and promoting security and autonomy in the management of these assets.”

Cryptocurrency Broker Reserves

Since the collapse of the FTX brokerage, cryptocurrency brokers are increasingly adopting the proof of reserves method as a way to ensure transparency and security for users.

Shortly after the bankruptcy of the then third largest broker on the market, many other brokers rushed to show their reserves. This would serve as proof that customers’ balances are there and stationary, without the need for massive withdrawals.

The practice involves publicly demonstrating that the broker has enough cryptocurrencies in reserve to cover all withdrawals requested by customers.

The adoption of proof of reserves emerged as a direct response to concerns about the financial strength of brokers. In a sector where user trust is paramount, this measure aims to strengthen trust in platforms and demonstrate that they can effectively fulfill their obligations, even in times when platforms are facing difficulties.

According to experts consulted by the LivecoinsBy casting doubt on its reserves, a broker jeopardizes its reputation, not only with current users, but also with potential new customers.

Users, noticing a possible lack of reserves, may start to question the financial strength of the broker. The situation could also draw more attention from regulators, who are increasingly paying attention to stability and transparent practices in the sector and are already planning to require the segregation of funds at cryptocurrency brokers in Brazil.

The suggestion that a platform does not have sufficient reserves can therefore be very damaging and undermine the confidence of its customer base and its stable position in the market.

O Livecoins looked for the Bitcoin market to comment on the matter, but received no response at the time of writing this article. The text is updated with new information when the broker makes a statement.

Questions we asked include:

• Does MB segregate assets?
• Does MB have its own reserve?
• If so, why do you say you don’t have bitcoins?
• How much does MB have in reserves and how can users check this?