Life savings lost. Desperate cries for help. Allegations of fraud.
In the six years since its founding, the San Francisco-based exchange Coinbase has established itself as one of the most trusted places to trade ether, bitcoin, litecoin, and bitcoin cash. It’s also run up its share of critics: namely, its customers.
In 134 pages of complaints filed to the SEC and the California Department of Business Oversight obtained by Mashable following a five-month FOIA process, a picture emerges not of a responsible actor in the cryptocurrency space opening the market to new investors, but rather a company overwhelmed by and underprepared for its own success.
And the consequences — as expressed by Coinbase’s own customers — are enough to give even the most diehard crypto-enthusiast pause.
Money gone and no one home
A recurring theme in the SEC complaint files Mashable obtained is the seeming disappearance of a would-be trader’s money, and what is portrayed as an aggressive nonchalance on the part of Coinbase in response to the loss.
“If I can help to dismantle these frauds and protect any other people in America or abroad, I am more than happy to do so.”
Notably, the SEC redacted the complaints to remove personally identifiable information. This, while an understandable privacy measure, makes it practically impossible to reach out to the complainants for follow up. As such, we’ll mostly let their words speak for themselves.
And there are a lot of words.
One complaint, filed in January of this year, is typical of the frustration expressed by many.
“I have sent 17,023.00 from my Coinbase account to another Coinbase account on 12.21.2017,” it reads. “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.”
After claiming to have lost $5,000 as a result of the error, the customer levies the following allegation: “I believe the company is holding my funds to make money on top of my investment.”
This individual is far from alone in his or her suspicion. Numerous other people allege Coinbase is intentionally withholding their funds for untold purposes. One such complaint, originally submitted to the California Department of Business Oversight and then forwarded to the SEC, accuses the company of “acting criminally.”
“Coinbase has been in possession of my funds ($21,000) since August 30th, 2017,” reads the complaint from September of last year. “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.”
Another individual claims that Coinbase has “stolen” a “majority of [their] life savings,” and despite dozens of attempts to get in touch with someone at the exchange, they have only received form emails in response.
That complaint was echoed by another individual in search of their missing $15,000.
Importantly, these examples are not outliers in the document batch we received. In response to our narrowed FOIA request, the SEC provided Mashable with 115 complaints made against Coinbase. Granted, by their very nature complaints filed to the SEC are not going to be complimentary of the exchange. Still, in reviewing the reports, a troubling pattern emerged of customers claiming to be out thousands of dollars due to alleged Coinbase mismanagement.
In response to request for comment, a Coinbase spokesperson pointed to last year’s surge in interest in cryptocurrency, and insisted the company is rising the meet the challenge.
“In 2017, the cryptocurrency space experienced a profound uptick in mainstream awareness and growth,” noted the spokesperson. “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.”
While some users of Coinbase reported seeing their investments vanish, others found them just out of reach in apparent permanent limbo.
In November of last year, one individual wrote to the SEC that they were locked out of their account holding approximately 10 bitcoins, and claimed that Coinbase had copped to the fact that it was all the company’s fault.
“I am prevented from selling, buying, transferring or accessing my property and also cutoff from all transaction history and other information,” reads the complaint. “After repeated prompting via emails and phone calls, Coinbase advised me that I am locked out of my account as a result of a security software error on their end and that they would look into it. That was a month ago.”
“Coinbase does not get back to you,” observed the same individual, who blamed the lack of response on the company’s prioritization of growth over its existing customers. “I believe Coinbase has engaged in fraud by knowingly marketing a service it knows it cannot actually provide.”
Another user of Coinbase reported much the same thing, noting that they were now on a mission to bring Coinbase down.
“I am happy to take this as far as possible, socially, politically, and economically, if I do not receive what I am owed, or continue to receive no response from the company, both of which I’m sure are inevitable,” wrote the person in August. “If I can help to dismantle these frauds and protect any other people in America or abroad, I am more than happy to do so — just reach out.”
This is not the first time customers have expressed an intense grudge against the exchange. In February of this year, a glitch resulted in the bank accounts of some Coinbase customers being mistakenly drained. In response, some Redditors threatened to show up at the company headquarters with guns.
That situation, however, was a one-off mistake — albeit a really bad one. A significant portion of what’s contained in the SEC complaints, on the other hand, reflects an apparent pattern of alleged mismanagement by the exchange.
Even the result of Mashable’s FOIA request, which was narrowed down extensively in a back and forth with the SEC, contains more examples than we can fit in this article.
Coinbase clearly isn’t done with its growing pains just yet.
One of the good ones
It wasn’t supposed to be this way. Valued at $1.6 billion, Coinbase has positioned itself as an island of respectability in a sea of crypto-shadiness. The company complies with know-your-customer and anti-money laundering laws, and brags about being regulated. And, despite initially fighting the order in court, Coinbase eventually agreed to hand over data on some of its customers to the IRS.
In a seeming contradiction to the popular trope of cryptocurrency users being mainly criminals and drug users, none of these pro-regulation measures appeared to slow the company’s growth. The Coinbase app reached the top of Apple’s App Store last December, and according to Forbes the company generated $1 billion in revenue last year.
And, according to a company spokesperson anyway, Coinbase is making sincere efforts to better serve its customers.
“Over the last few months we have: Increased our support team by over 150 percent,” and “[decreased] our average time to first response to <10 hours for 95 percent of incoming volume today,” the spokesperson explained over email. “As a result, we are able to resolve issues faster and have decreased the backlog by 95 percent. We now have over 600 support agents working on our queues across three different locations and we offer phone support 24 hours a day, seven days a week.”
Other attempts by Coinbase to address customer complaints have been documented in a series of company blog posts. One such post, highlighted by the Coinbase spokesperson over email, from May of this year is written by VP of operations and technology Tina Bhatnagar. In it, Bhatnagar acknowledges long wait times for customers seeking help, and lays out additional steps the company plans to take to better its services:
Published Service Levels: Over the next 90 days we will baseline and publish our committed time to resolution so our customers understand the bar we are setting for ourselves to deliver fast resolutions to their issues.
Additional Channels: In addition to phone and email, we will launch social media and chat support later this year.
Revamped Help Center: We will be updating our Help Center by the end of the year for better ease of use, more educational material and a simple way to contact us.
Surely, this is all a major improvement.
But as the sampling of Coinbase customer complaints lodged with the SEC and the California Department of Business Oversight makes clear, the company has a lot of goodwill and customer trust to rebuild.
It just goes to show that even the supposed good guys can run into trouble in the land of cryptocurrency — especially when it’s of their own making.