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Coinbase Crisis Deepens
Popular Crypto Exchange Tries to Manage Backlash
As reported previously by Crypto Market News, many users have lost faith in Coinbase.
Coinbase, one of the most popular exchanges in the United States, has been working hard on restoring its public image. The exchange faced massive backlash following the purchase of Neutrino, an Italian firm specializing in monitoring, analyzing and tracking cryptocurrency flows. The scandal started when it was exposed that the team behind Neutrino shared many members with the widely despised Hacking Team.
Who Are Hacking Team?
Hacking Team is an Italian firm that specializes in surveillance and spyware. They deal in extracting files from unknowing individuals, intercepting emails and instant messages and remotely activating microphones and webcams. Hacking Team gained notoriety for their willingness to co-operate with governments known for their human rights abuses. This includes but is not limited to Saudi Arabia & Sudan. In July 2015, Hacking Team were hacked themselves & 400GB of internal data leaked online.
The purchase of Neutrino caused uproar amongst Coinbase's users and prompted #DeleteCoinbase on Twitter.
Coinbase Pushes out Hacking Team?
In an attempt to do some damage control, Coinbase's CEO Brian Armstrong published an announcement. In the announcement, Armstrong declared that any Neutrino employee that previously worked for Hacking Team will transition out of the company.
"However, we had a gap in our diligence process. While we looked hard at the technology and security of the Neutrino product, we did not properly evaluate everything from the perspective of our mission and values as a crypto company. We took some time to dig further into this over the past week, and together with the Neutrino team have come to an agreement: those who previously worked at Hacking Team (despite the fact that they have no current affiliation with Hacking Team), will transition out of Coinbase."
More Damage Control Needed?
In an interview with Cheddar, Coinbase's director of institutional sales, Christine Sandler made some shocking claims. Sandler attempted to justify the purchase of Neutrino by claiming it would help with data security. She further claimed that their current providers are selling client data hence the purchase.
"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."
Coinbase has currently retracted Sandler's statement and claim that she "misspoke".
The Bottom Line
Once your credibility is as harshly damaged as Coinbase, it is difficult to rebuild client trust. While it is currently unknown how many users have actually deleted their account, this scandal might affect new sign-ups. One of the problems is Coinbase's lack of action and initiative. Their insistence on collaborating with Neutrino while promising to fire Hacking Team's former employees seems like a weak response by many.
Sandler's statement is also deeply worrying to many crypto traders. Especially in the blockchain world, many users are concerned about privacy.
Many American crypto-traders may begin to prefer other exchanges to Coinbase. This may even affect the trading volume of USDC, their native stable-coin.