Coinbase on the tablet and phone display

Coinbase fined millions for Dutch delay, CEO Armstrong losing faith in ETH?

Coinbase (NASDAQ: COIN) has been fined over €3 million ($3.3 million) for delays in seeking a Dutch license, while CEO Brian Armstrong’s shedding of his Ethereum skin is raising questions over his motives.

On January 18, Dutch central bankers De Nederlandsche Bank (DNB) imposed an administrative fine of €3,325,000 ($3,615,857) on Coinbase Europe Limited for having “provided crypto services in the Netherlands in the past without registration with DNB, which is in non-compliance with the law.”

The Dutch Anti-Money Laundering and Anti-Terrorist Financing Act require ‘crypto’ companies wishing to offer products and services to local residents to first get approval from the DNB. This requirement was instituted in May 2020 due to the crypto sector’s perceived high risk of involvement in activities the Dutch government frowns upon.

The DNB says Coinbase was not in compliance from November 15, 2020, until “at least” August 24, 2022, when DNB’s probe concluded (Coinbase secured its registration on September 22, 2022). This “very severe” non-compliance offered Coinbase “a competitive advantage” over its compliant rivals because it wasn’t required to ante up any supervisory fees or other costs associated with the DNB’s oversight.

The net result of this non-compliance was that “a large number of unusual transactions may have gone unnoticed by the investigative authorities.” Coinbase’s fine would have been even higher, but the DNB applied a 5% discount because the exchange said it “always intended to obtain registration” (they just didn’t get around to it for a couple of years).

Coinbase has until March 2 to object to the fine, but the company has already indicated that it believes the fine to be unjust, given how long it took the exchange to obtain Dutch registration. Coinbase also stressed that the DNB judgment found “no criticism of our actual services,” except for, you know, the whole ignoring the law thing.

The size of Coinbase’s fine—not far from the €4 million ($4.3 million) maximum—is equal to the penalty the DNB imposed on Binance last July. Binance’s penalty came after the controversial exchange ignored the DNB’s public warnings that it was “illegally offering services for the exchange between virtual and fiduciary currencies.” To be fair, illegally offering services is basically Binance’s business model, but rules are rules.

Own goal coming in 3… 2… 1…

Coinbase has prioritized international expansion as its stateside woes continue to mount. Last November, not long after it belatedly secured its Dutch registration, Coinbase announced four executive appointments to bolster its Europe, Middle East, and Africa (EMEA) business.

These new hires included former Bittrex compliance officer Michael Schroeder as Coinbase’s new director of controls for Germany. It may seem odd that Coinbase would look to Bittrex for compliance lessons, given that the month before Schroeder’s appointment, Bittrex was fined $29.3 million for historical “deficiencies related to Bittrex’s sanctions compliance procedures.”

The same month that Coinbase announced its new European hires, the exchange was publicly scolded by Germany’s BaFin financial regulatory body. While BaFin didn’t go into details, it told Coinbase to “ensure proper business organization” after an audit uncovered “organizational deficiencies” at the exchange.

Regardless, German football stalwarts Borussia Dortmund (BVB) announced this week that Coinbase was its new premium partner. Terms of the deal weren’t disclosed, but Coinbase will now enjoy perimeter advertising at the club’s Signal Iduna Park, as well as a presence on digital ads and via BVB’s social media channels.

Share(s) the wealth

Coinbase will release its Q4/FY 2022 financial report card on February 21, but investors have already been warned to expect additional losses on top of the $2.1 billion in red ink the company bled through the first nine months of 2022. Still, the latest round of staff cuts might allow CEO Armstrong to assure investors that there are better, more profitable days ahead.

But if Armstrong truly believes in his company’s future, he’s not necessarily showing it. Armstrong dumped another $4.5 million worth of Coinbase stock on January 18, boosting his 2023 sell-off total to $5.1 million. Coinbase’s chief financial officer Alesia Haas was not far back in second place with total sales of $3.4 million this month.

The only Coinbase insider who has made any stock purchases in the last six months is Shopify founder/CEO Tobias Lütke, who joined Coinbase’s board of directors one year ago. Armstrong said Lütke was brought on at the time due to his “wide variety of skills and expertise,” but we’re starting to suspect his primary role was exit liquidity for Coinbase’s other directors.

Consider Surojit Chatterjee, the chief product officer who joined Coinbase in February 2020. Chatterjee signed a five-year contract, but last October, the company announced he’d be stepping down early based on a “mutually agreed” decision. Chatterjee will formally cut his Coinbase cord on February 3.

Chatterjee hasn’t sold any Coinbase shares in over a year, but his separation agreement calls for over 249,000 shares in unvested stock options to be eligible to vest, provided he continues to serve in an ‘advisory’ capacity through the end of this year. But it’s unclear how much Chatterjee’s advice is really worth.

Recall that Chatterjee took point on last year’s horribly inept rollout of Coinbase’s NFT marketplace. By the end of 2022, Coinbase NFT had done just $7.2m in total sales volume, $1 million below what market-leader OpenSea did in just one day in December. Coinbase seemed almost relieved when Apple’s app store commissions ‘forced’ the exchange to remove NFT functionality from its iOS app.

Regardless of how much that debacle played into Chatterjee’s exit, DL News reported that the shares he sold following the company’s April 2021 Nasdaq listing have brought him a total payday of $105 million. His stock options were priced below $19, and Coinbase share price soared above $342 following its Nasdaq debut before dipping as low as $32 earlier this month.

Coinbase stock has since rebounded to over $50, partly due to this month’s unwarranted surge in the price of BTC and other function-free tokens. But the gains also owe a lot to the highly public collapse of rival FTX, which Coinbase sought to capitalize on by taking out a full-page ad in the New York Times trumpeting its “transparent accounting and audits.”

But a new analysis from Mizuho shows that, of Coinbase’s retail users who didn’t make a single trade in December, 89% had yet to make a trade in January. Mizuho’s Dan Dolev said there was “no retail appetite for crypto trading” among Coinbase’s retail users. With higher-margin retail accounting for 83% of Coinbase’s 2021 revenue (the 2022 numbers aren’t in yet, remember), Mizuho reiterated its ‘underperform’ rating and set a $30 price for Coinbase’s shares.

Armstrong reborn as BTC maxi or SEC supplicant?

Armstrong raised eyebrows this month when he dropped the ‘barmstrong.eth’ appendage from his Twitter profile. The change was odd, given that after the Ethereum blockchain made its transition from a consensus mechanism based on proof-of-work to one based on proof-of-stake last year, Coinbase said it was betting big on ETH staking to help reverse its sagging fiscal fortunes.

Some observers have used Armstrong’s unexplained shift to claim that Armstrong is returning to his roots as an unvarnished supporter of BTC and the supposed enemy of ‘altcoins’ such as Ripple (XRP). Armstrong ultimately deleted those 2015-era pro-BTC/anti-altcoin tweets, and Coinbase embarked on a questionable strategy of listing every useless altcoin possible.

Revenue from transaction fees on these new token trades proved irresistible, despite the inevitable insider trading that resulted, including a former Coinbase product manager currently facing criminal and civil charges for joining in on the insider fun.

The exposure of those insider trades prompted the U.S. Securities and Exchange Commission (SEC) to investigate Coinbase for selling unregistered securities—a definition that applies to all tokens that featured a pre-mine phase. Including, ahem, Ethereum.

It remains to be seen exactly what prompted Armstrong’s ETH exorcism, but fear of annoying the SEC would seem low on the list. Coinbase has habitually adopted an antagonistic, often juvenile approach in its public responses to SEC’s directives (or, for that matter, to nine-figure fines imposed by state regulators).

Could it be that some adults have (finally) entered the Coinbase C-suites to educate them that yelling “you’re not the boss of me” isn’t generally considered an acceptable legal strategy, particularly when your whole business model depends on selling unregistered securities?

Follow CoinGeek’s Crypto Crime Cartel series, which delves into the stream of groups—from BitMEX to Binance,, Blockstream, ShapeShift, Coinbase, Ripple, Ethereum, FTX and Tether—who have co-opted the digital asset revolution and turned the industry into a minefield for naïve (and even experienced) players in the market.

New to blockchain? Check out CoinGeek’s Blockchain for Beginners section, the ultimate resource guide to learn more about blockchain technology.