Coinbase (NASDAQ: COIN) is one of the largest and best-recognized digital asset exchange in the world. They’re even publicly listed on the Nasdaq (NASDAQ: COIN). So, you might be forgiven for mistaking the company for a credible enterprise. Unfortunately, making that mistake can lead to financial ruin, as tens of thousands of Coinbase customers have discovered.
CNBC recently conducted interviews with Coinbase customers all over the U.S., reviewing thousands of complaints which they say “reveal a pattern of account takeovers, where users see money suddenly vanish from their account, followed by poor customer service from Coinbase that made those users feel left hanging and angry.”
It’s the same story over and over: hopeful investors begin using Coinbase (usually after the latest run-up in digital asset prices) and then after a time, discover that their accounts have either been locked without warning, had their account balances drained, or both.
‘Tough luck’
To put to rest the idea that Coinbase’s direct listing or market dominance says anything about the company’s credibility, the victims CNBC spoke to all discovered that after having their accounts drained, they had no way of getting in touch with anyone at Coinbase. Their phone lines wouldn’t be answered, and to the extent that customers had better luck with the exchange’s customer service inbox, the responses from Coinbase boil down to ‘tough luck’, with no investigation. Social media is littered with stories of customers whose Coinbase balances have been drained right before their eyes, and yet have been left out in the cold by the exchange that often bills itself as the most trusted entity in the digital asset ecosystem.
Publicly, Coinbase is aware of their failings. The company ran a series of blog posts starting in January (right as excitement around rising digital asset prices was reaching fever pitch) pledging to improve their customer service to keep up with an unprecedented influx of users. These posts petered out around March; one of the latest posts in the series, dated March 24, is still pinned atop of the Coinbase subreddit, above a cacophony of disgruntled customers begging to be put in touch with a customer service representative. Quite on brand, the post is locked to comments.
There was one more blog entry specifically addressing Coinbase’s (lack of) customer service capabilities, posted less than a week before the CNBC released their report on August 24. That isn’t a coincidence: the post specifically addressed account takeovers (ATOs) and emphasized the ‘multiple channels’ that customers can use to ‘quickly and easily’ lock their account so that no further unauthorized activity can take place.
That’s about all that can be said for Coinbase’s public attitude toward customer trust and security. Privately, however, the company is disinterested in addressing the concerns being raised by customers. The same platitudes that Coinbase had hoped would pre-empt CNBC’s story were offered back in the January posts, yet things appear to have only gotten worse. Coinbase’s social media channels are still saturated with frantic complaints from users who have either been locked out of their account, had it drained, or both. Even more troubling, the CNBC report identified actions taken by consumer watchdogs against Coinbase have been met with silence. For example, the U.S.’s Better Business Bureau has contacted Coinbase regarding the whopping 1,128 complaints it had received about the exchange in the past three years and had yet to receive any response.
Coinbase’s go-to line to customers has been that they do not have the ability to reverse crypto transfers sent off their platform. CNBC’s report included a similar lament, saying that according to the FBI, digital currency transactions cannot be reversed.
Here’s what CNBC got wrong and what victims of coin thefts need to hear. Blockchain transactions can be reversed, just not by Coinbase; rather, the most direct solution is to go to the centralized protocol developers responsible for these digital assets and their blockchains.
It is those developers who can reverse the transactions. This can be done for the same reason developers (like those responsible for BTC) can release landmark updates to their protocol as often as they choose. Why does no one question why BTC developers can release something like Taproot and yet be unable to take action on stolen property which they know has been stolen and they know exactly where that property is in the blockchain they control? Bitcoin initially included functionality that addresses exactly be trivial, a this situation until it was removed by subsequent developers. Reimplementing it wouldnd there’s a good argument—currently being tested in the courts—that the centralized protocol developers are not only able to reverse Bitcoin transactions via this method, but they have a legal obligation to those using the blockchain to do so.
And so, these victim’s stories don’t end when their account has been drained, no more than would the story end when a criminal has forced you to drain your fiat account at gunpoint. If you know where your stolen property is, it doesn’t matter that it’s behind the locked door of some third party, and the security of the lock is certainly irrelevant. That’s your stolen property behind those doors. If the owner of a hotel knows that one customer has stolen the property of another and concealed it behind some other locked door in the hotel, the hotel can’t throw its hands up and say your property is gone forever—assuming proof, they need to open the door and give that property back to its rightful owner. Refusing to do so would amount to conversion, another kind of theft.
Coinbase is getting by on credibility it hasn’t earned, and we should stop letting them get away with it. Its size and notoriety say nothing about the company’s ability (or willingness) to support the millions of clients pouring their savings into the exchange. Those unfortunate enough to have been victimized by thieves while using Coinbase have discovered that when push comes to shove, the exchange is exactly the kind of opaque, unreachable bucket shop that many assumed was left behind in the early days of crypto. On the contrary, they’re still here—only now they’re listed on the Nasdaq.
We should also stop peddling the narrative that victims of digital asset theft have no recourse. Of course they do. Thankfully, some corners of the industry have cottoned onto this: anyone who has lost their tokens, either through a hack or otherwise, can visit Token Recovery to explore the options available to them.
Better yet, do as Dr. Wright himself does and use the courts as they were designed to be used—to enforce your rights and the obligations that others owe to you.
Follow CoinGeek’s Crypto Crime Cartel series, which delves into the stream of groups—a from BitMEX to Binance, Bitcoin.com, Blockstream, ShapeShift, Coinbase, Ripple and
Ethereum—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.
