Coinbase has had an interesting week or two, it’s fair to say. Buried in the hype garnered by adding XRP to Coinbase Pro, they also acquired a blockchain startup called Neutrino, which they announced on February 19, claiming that it would help Coinbase “bring more cryptocurrencies and features to more people while helping ensure compliance with local laws and regulations.” So far, so insignificant. Except that some digging by crypto detectives started a revolution that has turned an announcement into a PR disaster for Coinbase.
CEO’s Background Comes Under Scrutiny
Coinbase’s trouble first started when Twitter users uncovered some alleged shady activity by Neutrino CEO Giancarlo Rosse in a previous role, particularly around the creation and sale of spyware to purported human rights infringing actors. This started the #DeleteCoinbase movement, resulting in Coinbase Head of Sales Christine Sandler appearing on Cheddar Friday to state that, as a result of the movement, they were “looking into” the backgrounds of those involved in Neutrino, before somewhat undermining that by saying that they still prioritized the technology over the personnel.
During this interview she made an extraordinary admission regarding one of the key reasons for the Neutrino acquisition, and perhaps why background checks were overlooked at the time:
It was important for us to migrate away from our current providers. They were selling client data to outside sources and it was compelling for us to get control over that and have proprietary technology that we could leverage to keep the data safe and protect our clients.
This revelation sent shockwaves through the crypto community and ratcheted up the pressure on Coinbase, and the #DeleteCoinbase movement, to new heights. Bearing in mind that many are in crypto for civil libertarian reasons, the responses were somewhat predictable:
So @coinbase defended its acquisition of an analytics team likely to go rogue and sell costumer information to authoritarians by . . . Admitting that its old analytics team was already selling customer information. #DeleteCoinbase pic.twitter.com/SmEUMKYfOR
— Exceptionally Brilliant (@davidzmorris) March 3, 2019
YOU DID WHAT?!?!
And that’s why we should trust the people you choose to do business with?!?! https://t.co/XBb3ncHmxI
— Udi Wertheimer (@udiWertheimer) March 3, 2019
Coinbase’s Reputation Takes a Hit
Stories have also emerged that users are having difficulty in deleting their Coinbase accounts, complaining that the company has made the process unnecessarily complicated in an attempt to put customers off doing so. The entire episode has proved to be a disaster for Coinbase, who perhaps illustrated their naivety by leaving their PR team at home and sending a salesperson to face the cameras.
Questions have also rightly been raised surrounding the fact that user information was leaked to third parties, which constitutes a data breach that must be investigated, but on which Coinbase has not yet commented. It may be that the issue blows over, but it seems that, even if it does, serious harm has been done to Coinbase’s reputation, which was already rock bottom with some members of the crypto community.