Coinbase is stealing user funds, according to customers who have made claims with the SEC and the California Board of Business Oversight. News outlet Mashable indicates that the information was obtained through a Freedom of Information Act (FOIA) request. The claims total over 134 pages and make for grim reading. The following are two sample complaints.
“I have sent 17,023.00 from my Coinbase account to another Coinbase account on 12.21.2017. The other Coinbase account never received the funds as of 1/16/2018. I have contacted Coinbase over 7 times and all they say is that they have so many issues, they will get back to me and it is been a month.”
“Coinbase has been in possession of my funds ($21,000) since August 30th, 2017. They have effectively stolen my money at this point. They have no way to reach them by phone, and they are ignoring my repeated attempts to resolve this matter.”
The majority of the claims indicate that Coinbase is stealing user funds and hoping to make a profit in an unregulated market. The claims are quite serious. However, it is unlikely that an entity as large and regulated as Coinbase is deliberately stealing user funds. Many mistakes are made in cryptocurrency investing and people often fail to secure their accounts, follow basic instructions or even send to the correct wallet address.
Additionally, the issues in customer service among European and US cryptocurrency exchanges are well known and documented, given the influx of users and the inability of the network to process the increased volume, particularly in 2016 and 2017. There are numerous reports of exchanges failing to respond to queries of locked accounts and a verification process that many indicate does not work. Some users reported two-month verification times even when everything was done correctly. The reality is that there was too much volume for the exchanges to handle at the time. According to a Coinbase spokesperson in response to the FOIA request:
“In 2017, the cryptocurrency space experienced a profound uptick in mainstream awareness and growth. As part of that, consumer demand for our services increased by 40x and we experienced transaction volumes in November and December of that year that grew by 295 percent.”
But true as this may be, it is no excuse for the blatant violation of acceptable standards of customer care. It can’t have been that difficult to hire people to simply respond to emails promptly, apologizing to customers, and explaining the network was experiencing congestion issues due to an influx of new users. Eastern exchanges such as Binance and Kucoin have not experienced problems like this, and verification is quick and easy.
Since the industry was unregulated, and so many individuals wanted to gain exposure to the new digital asset class, certain exchanges felt that they had the power to do as they wished regarding customer service. And they did, to a large degree. But now that Coinbase is coming under increased scrutiny, as the most regulated exchange in the world, such actions are coming back to haunt them.