

High risk transactions - aryanet
http://blog.coinbase.com/post/44046687068/high-risk-transactions
Cancelled orders on CoinBase is going to kill their business. New customers are unhappy and the post does not make sense as the users are verified and money is withdrawn from their account.
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zachlatta
I understand where they're coming from, but my experience with support has
been less than stellar. About four weeks ago I bought 10 BTC from them. My
transaction was deemed "high-risk" and the order was cancelled. I never got my
money back.

I've been corresponding with support over the past four weeks and still
haven't seen a dime. Support generally takes 4-5 business days to respond to
each email. I understand that their support staff is extremely limited, but it
is still unacceptable, especially because they're dealing with monetary
transactions.

~~~
sliverstorm
What do you mean, "you never got your money back"? They're just sitting on
$2,000 USD of yours?

~~~
zachlatta
Presently, yes.

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fragsworth
If a transaction is decided to be "High Risk", why not postpone the
transaction until additional verification is done?

Instead, we are left wondering if Coinbase is selectively cancelling
transactions that they can make a profit off of (due to the volatility of
bitcoins)

~~~
pault
If the flagged transactions were immediately rejected it would obviate the
need for excuses. What benefit do they get from putting the transaction in
limbo for days before they notify the user?

~~~
patio11
If you give users immediate feedback as to which transactions hit your fraud
screen, this allows fraudsters to black box reverse engineer your fraud
detection algorithms much, much faster. You very much don't want to do this if
you're a financial services business, because if your primary anti-fraud
mechanism is an automated system and fraudsters discover the rules to it, you
will probably learn about that first when you wake up, run an accounting
report, and discover you lost $8 million overnight.

I don't think the average HN user appreciates the risk environment payments
companies work in. Imagine if a criminal gang organized enough to have _a
payroll_ had ten copies of people who were every bit as good at app security /
financial risk management as e.g. Thomas, with two of them whose only marching
orders were "Probe payments sites every day, quietly, and tell the team when
you find one which is weaker than it could be. We will then conduct several
months of quiet R&D on a software product which is more elaborate than that
shipped by most YC startups. Our 'launch' will be deployment of that software
product against our adversaries at the payments company, and it will blitz
them so fast that by the time anyone thinks to pull the plug we'll be
millionaires. Then we'll celebrate our good fortune until we do it again next
week, to them or another company as circumstances dictate."

(Risk management, which a lot of startups need, is a high-leverage and very
fun environment to work in. At present a lot of companies, large and small,
custom build systems out of bubblegum and duct tape. If you get good at this
you'll have a very rewarding career ahead of you, for many definitions of the
word rewarding. I used to want to go into it but got sidetracked by the
unexpectedly high amounts of leverage you can get using software to sell
software.)

~~~
sethev
I'm curious: what do you mean by risk management (other than credit card fraud
prevention - or is that what you meant?)

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thinkcomp
Until Coinbase complies with applicable laws, every transaction they handle is
a high-risk transaction. They could be shut down at any moment.

They're not alone. There isn't a single Bitcoin exchange in the world right
now compliant with U.S. money transmission laws.

Buyer/seller beware.

Full disclosure: we're in litigation over this.

~~~
shtylman
Based on your username, I am going to assume you are referring to this
lawsuit:

[http://www.scribd.com/doc/139975904/Aaron-Greenspan-
lawsuit](http://www.scribd.com/doc/139975904/Aaron-Greenspan-lawsuit)

In which case you are the Plaintiff suing these companies which is very
different than the US government suing them.

~~~
cbr
Summary: Aaron Greenspan was running a company handling money online until
2011 when he ran into regulatory issues with the state of CA. He's now suing
many other organizations who are doing similar things, claiming those
organizations aren't trying to comply with the law which gives them an unfair
advantage. He appears to representing himself.

~~~
thinkcomp
"He appears to representing himself."

Not true, look at the docket.

~~~
cbr
Sorry, I got that from:

    
    
        REQUEST FOR CIVIL LOCAL RULE 3-9(b) EXEMPTION AND RETIREMENT
        This complaint is not signed by a member of the Bar of
        this Court and Plaintiff is a corporation. Civil Local
        Rule 3-9(b) requires corporations to retain counsel...

------
yebyen
I am surprised that nobody mentioned that yesterday, Coinbase crossed their
global "daily buy limit"! Users of Coinbase were greeted with a new interface
to buy coins, prompting them to click and confirm their transactions would not
be completed until Friday (the usual condition on a Monday) and that their
USD-quoted price would be processed at the effective market rate at that time
(if you're used to doing business with Coinbase, they mention a time but
really the deal is done at the time of their choosing) on Friday.

So, you are agreeing to spend a given amount of USD to acquire BTC, but the
price is not fixed and you actually don't know the number of BTC you'll be
getting until their calculation of the market rate occurs, five days from now.
I had the same experience as the person in Coinbase Blog, they white-listed
me, now I have an expectation that they will deliver on their promises.

Before that, I don't think I ever did (or had any reason to.) Some company on
the internet is agreeing to take my bank details and make a withdrawal from my
bank account, but what happens next is anyone's guess.

(A thought exercise: what is it exactly about letting 5 days pass before that
makes it safer for Coinbase to part with a sum of bitcoins when a bank
transfer is completed? The owner of the account has had zero opportunity to
contest the charge as fraudulent, and those bitcoins go "at-risk" on that day
when the transaction is completed. If there is a run on bitcoins, how does
Coinbase guarantee they will be able to satisfy all of the orders they've
accepted?)

------
shtylman
People like to make it seem that a bitcoin purchase is life or death and
basically equate being able to buy bitcoins whenever and however they want up
there with life, liberty, and the pursuit of happiness.

~~~
shtylman
Don't be hatin' just cause you have never seen panic buying ;)

------
colinbartlett
What does a reversible payment method mean? And how does that differ from Mt.
Gox? I know Coinbase is not an exchange like they are but are their payment
methods different? Genuinely curious.

~~~
shtylman
Coinbase uses a method called "ACH" to electronically request the money from
your bank account. The problem with this method is that it is relatively easy
for a fraudster to get the information needed to do this (routing and account
number) and submit that as their account on coinbase. Consumer protection
banking laws in the US are very consumer favorable and thus if someone goes to
their bank and claims they did not authorize the transaction (of coinbase
taking the money from your account) the funds will be returned to you and
coinbase will take the hit. Now, typically this is less of an issue, but with
bitcoin, coinbase is not able to take back any bitcoins they have let you
withdraw. Thus you can see where this leaves them in a very delicate situation
about having to monitor how and who they withdraw money from as well as the
amounts.

~~~
aryanet
Good details. US laws suck. But they have all this account/identity
verifications which is trackable. As a new user, I followed all steps to
become a good user, but all my transactions are being cancelled. I even tried
new accounts, and no luck. So, if they were to follow this trust pattern, no
new user would be able to become a good user. I have seen posts where people
who are veterans on coinbase have their transactions cancelled. I am to the
point that I want to drop by their office with a physical check in hand and
tell them to buy me BTC.

~~~
shtylman
Ironically enough, due to check fraud that check might not help you as much as
you think ;)

I don't know what algos they use to detect fraud but being a veteran does not
always mean there won't be fraud on your bank account. Remember, this is not
about those five 10 dollar transactions you authorized, this is about that one
5 thousand dollar one that was the result of fraud. From their point of view,
a false positive is much better than a false negative.

~~~
aryanet
OK. Then with the current bitcoin price, their risk level goes significantly
higher. They should really open the option to people walking into their office
and drop off physical checks. I am willing to do that and that does not have
the problem is ACH because it is in physical form and has your signature on
it.

~~~
dangrossman
Sure it does, especially since many times checks aren't actually sent to a
clearinghouse, but scanned and turned into ACH transactions. They're just as
easy to counterfeit (you can order checks with any account and routing number
you want from Vistaprint online, or print your own at home) and sometimes just
as easy to reverse. A cleared paper check that was never converted requires a
bank's intervention to reverse, but it's still possible.

You want to show up with cash, not a check.

~~~
aryanet
OK. Cash in the suitcase. ;) I feel like a gangster.

------
antonius
A couple large bitcoin funds go broke to hackers and the price of bitcoin
subsequently doubles in a little over two weeks. I'm curious to see how this
will continue to play out.

~~~
aryanet
I like to co-relate it with bitcoin value is finally being realized. Or
perhaps because the difficulty for mining it is exponentially increasing.

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rabbidruster
Their site seems to be down. Scary!

~~~
iancarroll
It's up again. Coinbase is YC-backed so the founders aren't thin air.

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analog31
And they call Bitcoins a currency?

~~~
mahyarm
A lot of this hassle is interfacing with the US banking system, not bitcoin
itself. If banking was implemented as a push system vs. the current pull
system with no real authentication that we have in the US because of legacy
reasons, it would eliminate entire categories of fraud.

I've heard Europe is significantly better in this regard.

~~~
lmm
So does that mean there are exchanges in Europe where it's much easier to buy
and sell bitcoins? Because I'm not aware of any.

~~~
mahyarm
Supposedly bitstamp with it's SEPA integration? I don't know if it's much
easier or not. I just remember people talking about how nobody uses paper
checks in Europe and everybody uses the free / cheap online wire transfer
interface in their bank website to send money to other accounts in the
country. They use it to pay rent, send money for split meals, etc.

