
Desperate Coinbase customers turn to SEC with allegations of fraud - magnetic
https://mashable.com/2018/06/20/sec-coinbase-complaints-fraud/#KY6gkAueAiqI
======
spaceandthyme
I know several good people that have been locked out of Coinbase permanently -
without any explanation of why - for over a year despite repeated unanswered
requests to have accounts reinstated. I watched those people turn from
advocates for coinbase into critics. Just a simple explanation would have
helped prevent that scenario.

This company is a terrible example of how to do business. It's as if they
watched how Google handled AdSense publishers in the early days and decided to
copy that model for customer service.

I wonder how well that strategy will play out.

~~~
pavlov
Coinbase is basically the PayPal of cryptocurrency. Arbitrary unexplained
account freezes are part of the model.

~~~
kennxfl
Couldn't have said it better!

~~~
A2017U1
The first two sentences of the Bitcoin whitepaper:

> A purely peer-to-peer version of electronic cash would allow online payments
> to be sent directly from one party to another without going through a
> financial institution. Digital signatures provide part of the solution, but
> the main benefits are lost if a trusted third party is still required...

------
largehotcoffee
I operate an adult comic book publisher and Coinbase shutdown our account
without notice and blamed the bank they work with (despite the fact that we
were not converting our BTC to USD). All support tickets took 3 - 5 weeks to
get a reply and it was always unhelpful.

For a company like ours the whole appeal of Bitcoin is the anonymity, so our
readers don't have to worry about buying lewd comics and having it show up on
their statements. Coinbase tarnishes what Bitcoin stands for and they do not
protect artists/publishers.

Do not use Coinbase.

~~~
Casseres
> For a company like ours the whole appeal of Bitcoin is the anonymity, so our
> readers don't have to worry about buying lewd comics and having it show up
> on their statements.

Might I suggest Monero? That way if your customers use Bitcoin for other
things, others can't see the details of your customers' transactions with you.

If you don't convert into USD, there are different plugins that allow you to
collect the coins, if you do want to convert there's a service called Globee
that also takes BTC as well as XMR.

------
yoran
I lost access to my Coinbase account when I lost my phone and got locked out
due to 2FA. This was partially my fault for not being careful enough and not
saving the recovery code.

Anyway, they told me to create a new account. Their team would then verify
that both accounts are matching, as you have to submit a copy of your
passport. The funds would then be transferred from the old locked-out account
to the new account.

I did all this over 2 months ago. I am still waiting for the funds to be
transferred. I contacted support twice now, and I'm always getting the same
reply (we're still working on it).

Fortunately, due to a mistrust of exchanges, I only have a small portion of my
crypto-assets on Coinbase and keep most of it offline. However, it's still a
non-trivial amount of money. I'm not sure what extra steps I can take now
without it being too much effort on my part, because the amount is not that
high.

------
Animats
There's a law firm taking complaints against Coinbase and wrapping them up
into a class action.[1] PACER shows multiple lawsuits against Coinbase.
Arbitrations are confidential, but there are probably some of those, too;
Coinbase puts an arbitration clause in their contracts.

Arbitration clauses don't prevent a lawsuit where there is fraud. One of the
cases against Coinbase was forced out of arbitration because of that.

[1] [https://www.silvermillerlaw.com/current-
investigations/coinb...](https://www.silvermillerlaw.com/current-
investigations/coinbase-class-action/)

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starpilot
What I think computer programmers tend to ignore are principles of real
engineering in classical, high-consequence fields. It seems like Coinbase has
been following the mantra of "move fast and break things," that would
absolutely horrify any traditional engineer. Any civil engineer reviewing a
bridge, any aerospace engineer designing a passenger aircraft that he himself
may to have to fly on. When the work gets serious, it's time to move slowly
and fix things. "Move fast and break things" is antithetical to any form of
engineering.

~~~
commandlinefan
Well, remember, we work in an industry managed by people who are convinced
that programmers spend all their time browsing facebook and playing fortnight
and develop "give me one good reason why I shouldn't fire you right now"
methodologies like Scrum and "always looking over your shoulder" open offices.
Working slowly, deliberately, and safely is indistinguishable from slacking to
people who do nothing except look for slacking.

------
optimiz3
Here's a non-nonsensically opaque mail I recently got. Blocking early-adopters
and developers won't go well. Infuriating.

    
    
      Hello,
      
      Thank you for your interest in Coinbase. Our primary goal is to make digital currency safe and secure for our customers. Coinbase is a regulated Money Services Business under FinCEN (FinCEN.gov), and as part of achieving this goal, we are legally obligated to implement regulatory compliance mechanisms.
      
      Upon careful review, we believe your account has engaged in prohibited use in violation of our Terms of Service and we regret to inform you that we can no longer provide you with access to our service. We respectfully request that you follow the on-screen instructions presented when you log into your Coinbase account to send any remaining balance offsite to an external address.
    
      Should you have any questions or need assistance, please let us know and we'll be happy to help.
      
      Respectfully,
      
      Coinbase Customer Support
    

And the follow up:

    
    
      Hello,
      
      Thank you very much for your phone call about your account restriction.
      
      There are a variety of factors which have been weighed in your case, and we unfortunately are unable to elaborate on our internal decision process. Please know that we do not make these decisions lightly, and do regret losing you as a customer.
      
      We wish you all the best in your future endeavors. If you have any additional questions, please reach out to us by directly replying to this thread.
      
      Regards,
      
      The Coinbase Team

------
deltateam
That awkward moment when you appeal to authority, but it is the wrong
authority.

Coinbase doesn't trades securities, and had not even registered as a broker-
dealer at the time of any of these complaints.

Wouldn't the Federal Trade Commission be the more apt generic regulator to
lodge these complaints to?

~~~
JumpCrisscross
> _Wouldn 't the Federal Trade Commission be the more apt generic regulator to
> lodge these complaints to?_

The best strategy would involve papering many agencies. The CFPB, SEC, CFTC,
OCC, your state financial services regulator and attorney general, _et
cetera_. Generally speaking, the SEC is still deciding whether Bitcoin is in
its purview. Lots of complaints could cause it to classify Bitcoin exchanges
as being subject to the Exchange Act or 1934.

~~~
jonhendry18
"The best strategy would involve papering many agencies. The CFPB, SEC, CFTC,
OCC"

Preferably before January 20, 2017

------
keketi
> A recurring theme in the SEC complaint files Mashable obtained is the
> seeming disappearance of a would-be trader's money

Coinbase uses MongoDB, doesn't it? Asking for a friend.

~~~
throwbacktictac
They do indeed use MongoDB for parts of the system. However, the transaction
history and accounting is all stored in postgres.

------
test6554
Wow, I bought some digital currency through coinbase last summer and while I
had some annoyances with the transaction limits, high fees and the delays,
overall, I think they did a good job considering how fast they were growing. I
can't imagine how many fires they had to put out over there, and how hard it
would be to recruit knowledgeable and talented people.

That said, the fact that I made enough money to get a new car rather than lost
money probably skews my opinion.

~~~
kurtable
As a Canadian customer, I was pretty steamed that I could buy coins, but they
didn't tell me I couldn't sell them until after I'd already purchased. I
managed to transfer to MetaMask so it ended up okay.

~~~
garmaine
> but they didn't tell me I couldn't sell them until after I'd already
> purchased

Why would that not be the case?

~~~
chipotle_coyote
I can't tell if this is a genuine question or not, because if it's genuine
you're giving the OP an extremely ungenerous reading. "They didn't tell me I
couldn't sell them until after I'd already purchased" doesn't mean "I couldn't
sell the coins until after I bought them, and I had no idea that was the case
because I don't understand the basic concept of transactions." It means "I
wasn't allowed to sell the coins, and they didn't tell me that until after I
bought them."

~~~
garmaine
Ok. GP should reword because it seriously didn’t read that way.

~~~
freeloop10
me as well

------
yani
I have said it before. I will say it again. Coinbase is a bad player in crypto
world. It is a magnitute worse than PayPal during its blackhat days of freezen
assets. Their license needs to be revoked yesterday and not SEC but FBI needs
to be involved.

------
thisisit
This is a settlement problem. Coinbase is unable to settle money between
different accounts. And there is a perfect solution for this. We can use
blockchain....Oh Wait. /s

On a serious note, building a production level real time two book entry system
is hard. Many times money just disappears because both legs of transactions
don't match. The only way to track is some real good amount of sleuthing. But
given the amount of customers Coinbase is adding left and right, it might be
difficult to find time to get down to this sleuthing.

It would have been best for Coinbase to temporarily hold new accounts to get
their shit together. But I guess lure of money from constant trading was too
much.

~~~
mkirklions
How does money go missing? Ive been reading about money in a database and it
seems pretty straight forward.

Each transaction has an ID and a user ID, how does money disappear?

~~~
sanderjd
On the one hand, it's hard to scale a system without making it distributed at
some point and consistency in distributed systems is really difficult; the
system Coinbase is running is definitely not as straight forward as whatever
you've been reading about. On the other hand, this is their core competency
and it is absolutely not acceptable for money to go missing; it's a tough
problem but its their business and they have to make it work or they're in for
major trouble.

~~~
394549
> On the one hand, it's hard to scale a system without making it distributed
> at some point and consistency in distributed systems is really difficult

Banks have scaled systems like this with mainframes and COBOL for decades.
It's probably not as hard as you think to get it right if you have your
priorities straight.

IMHO, for banking, you need to KISS and avoid _all_ unnecessary complexity
(especially in the name of "scale"), at least for your master source of truth.

------
eximius
If you are a US customer and this happens to you, is submitting an SEC
complaint really the best option or should you lawyer up and sue?

~~~
mkirklions
Wait?

I got locked out of coinbase and 2 months later BTC went up 2.5x.

Thank god because I was going to sell 2 BTC. Only ended up needing to sell 0.5
+ 3 shitcoin cash.

~~~
eximius
This is both off topic AND harmful advice.

------
mastermojo
Personally I've used Coinbase since 2013 and apart from a couple transactions
(in 2013) getting flagged for fraud and reversed I haven't had any problems.
Despite whole bunch of personal horror stories, I don't think they are a
malicious, just unprepared for last year's massive usage spike.

------
asciimo
I could see a small firm offering one-on-one, high value cryptocurrency-to-
cash-and-back transactions doing very well. They could jump through all the
money exchange and KYC hoops just like Coinbase did, but offer top-shelf,
direct service.

------
deltateam
I realize this is more of a socioeconomic division, but I haven't used
Coinbase in over a year, OTC is so much better.

------
kennxfl
It's the start of an industry. This is bound to happen before someone
innovates around these mistakes.

------
arisAlexis
really skeptical. seems like never ending FUD. majority of the cases are
customers that lost keys or did something wrong. For sure coinbase is not
scamming people because they don't have to!

------
desireco42
Coinbase needs some serious competition. Their site is fine, until you ran
into a problem. I didn't have one, but from what I can see, once people run
into issues, they are just not resolved, hence frustration.

~~~
rihegher
what's wrong with the existing competition? 1Broker 1BTCXE ACX Allcoin ANXPro
Anybits Bibox Binance Bit2C bitbank BitBay Bitfinex bitFlyer Bithumb bitkk
Bitlish BitMarket BitMEX Bitsane Bitso Bitstamp Bittrex Bit-Z BL3P Bleutrade
Braziliex BtcBox BTCChina BTCExchange BTC Markets BtcTrade.im BTC Trade UA
BTCTurk BTCX BX.in.th C-CEX CEX.IO CHBTC ChileBit COBINHOOD coincheck CoinEgg
CoinEx CoinExchange coinfloor Coingi CoinMarketCap CoinMate coinnest CoinOne
Coinsecure CoinSpot CoinTiger CoolCoin Crypton Cryptopia DSX Ethfinex EXMO EXX
flowBTC FoxBit Gatecoin Gate.io Gemini GetBTC HADAX HitBTC Huobi ICE3X
Independent Reserve INDODAX itBit jubi.com Kraken Kucoin Kuna LakeBTC LBank
Liqui LiveCoin luno Lykke Mercado Bitcoin MixCoins NegocieCoins Novaexchange
OKEX Paymium Poloniex QRYPTOS QuadrigaCX QUOINEX SouthXchange SurBitcoin
TheRockTrading TideBit Tidex UrduBit Vaultoro VBTC VirWoX WEX xBTCe YoBit
YUNBI Zaif ZB

~~~
eximius
With the exception of Kraken, Poloniex, and Gemini, I either haven't heard of
these places or have heard nothing but terrible, terrible things (i.e.,
Bitfinex).

And I'm sure people have bad things to say about the ones I listed as not
being that bad.

There simply isn't a well trusted exchange. Coinbase/GDAX and Kraken are the
two I would recommend to people getting started, even with these issues
surfacing.

~~~
omarchowdhury
You really haven't heard of Binance or Bittrex?

~~~
eximius
I have technically heard of them, but basically just the names, not enough to
have an opinion.

------
JackFr
How is this even possible?

I mean it's on the BLOCKCHAIN, right?

~~~
desireco42
If it is in your wallet, then you own it, if it is not, you are not owning it.
Blockchain.

