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Coinbase customers demand refunds over GYEN stablecoin glitch


On the iPhone’s screen, you can see Coinbase crypto exchange app on Tuesday 12 February 2018.

Chesnot| Getty Images

Outraged CoinbaseAfter a technical issue caused the exchange to lock down accounts for several weeks due to which many users were potentially locked out of large amounts, they launched an online petition requesting that the company refund all their losses.

Coinbase explained to customers that there was a technical glitch with the trade of two cryptos in mid November. Many of these customers have criticized Coinbase for locking their accounts and taking their money improperly.

Coinbase customers had the ability to purchase GYEN in November. This stablecoin is pegged at one Japanese Yuan. PoWR, which is an energy-trading cryptocurrency, was also involved.

It highlights the risk to investors investing in new, lightly-regulated crypto markets. The rules and relationships among exchanges and customers remain unclear. And it shows that stablecoins – which are marketed as being pegged to outside assets to avoid the huge price volatility in other crypto currencies – are not always as stable as their name implies.

Chainalysis crypto analysis firm Chainalysis reported that GYEN first appeared on Coinbase in Nov. 10th.

The coin became loosely tied to the Japanese yen around November 17. Chainalysis claims it reached a peak of 0.065643, about 7.5x higher than what fiat investors believed they were receiving.

Chainalysis says that Coinbase’s transfer activity increased from Nov. 18 to $122 Million the next day. The firm also reports that transfer activity to Coinbase reached its peak on Nov. 20. Accordingly, the volume of Coinbase transfers on this day accounted for 84% total transfers.

The number of customers involved is unknown, as well as the extent to which they suffered losses. It’s also unclear whether any were able profit from the sudden price spike and were able sell their shares before it crashed back. The currency is currently trading at the intended level of the yen peg.

CNBC obtained an email from the company stating that GYEN on Coinbase had experienced unusual behavior because of market conditions. Coinbase suspended trading of GYEN for technical reasons on the 19th of November.

The email stated that customers who traded with GYEN from 19 November to now may have experienced decimal display problems for transactions. This could result in the wallet balance accurately reflecting the trade amount, but the transaction price might be 100x higher or lower than the actual purchase or trade.

Coinbase sent an email to one customer explaining that Coinbase.com had temporarily stopped all trades, buys, trades or sends for GYEN and POWR while they work on this issue. We apologize for this – we know this is a significant inconvenience and we’re working as quickly as possible to correct this to ensure that customers impacted can access funds as soon as possible.”

When asked what happened, and how the company would address complaints, a spokesperson for Coinbase told CNBC that Coinbase would publish a blog posting about the November 19th event which involved GYEN assets and POWR assets. GYEN/POWR trading has resumed on Coinbase Pro. Withdrawals are now possible on Coinbase.com. The Coinbase team is working around the clock in order to restore trading to the Coinbase retail application and respond to customers’ inquiries. Coinbase is not commenting at this point.

CNBC interviewed several Coinbase customers Tuesday evening, and they confirmed that their Coinbase accounts were not frozen.

Chris Fleming is the owner of a Ohio construction and maintenance business. He claimed that he purchased $1,763 of GYEN on Nov. 18. He was stunned to discover that his account had been reopened on Nov. 20.

The coin went skyrocketing, and somehow I had $151,309 to my account. It was holy s —. as any person would tell you. He said, “I thought it was imperative that he get out immediately as at any moment it could go back to nothing.”

Fleming claimed that he had not been granted access to the funds, and that it was still a long way before he can get them. an online petitionThe petition has attracted over 1,100 signatures worldwide.

“They kept my money captive for over two weeks. Fleming stated that I could have invested my money in other coins, and potentially made some gains. “They must give solid, concrete responses and should refund all those who have invested in this.

Ricky Peacock from Florida, who is also a mortgage lender, was similarly outraged. After purchasing GYEN at different price points, he also lost $132,000. He was locked out his Coinbase account. He claimed that his Coinbase account didn’t have an inflated value.

“Once [Coinbase]Peacock explained that when they realized the mistake they made, they kept everyone else locked up to defend themselves.” Peacock said, “My real investment was mine.”

He stated that Coinbase locked all users while it fixed the 100-times glitch, and this was what caused my loss. Coinbase did the right thing and saved customers like mine.

Ryan Huett is an Oregon winemaker who manages a Facebook group that includes more than 1,700 Coinbase customers who have lost their faith and are seeking answers.

Huett claimed that he had purchased $75,000 of GYEN between Nov. 18-19, but his account balance at one time showed 100x more GYEN than what he actually bought. He claimed that he cannot trade or transfer GYEN and took a screenshot of his account.

He stated that Coinbase should reimburse people for the dollar amount they have invested in stable coins at a higher price.

He stated that customers who managed to make a living and transfer crypto to Coinbase without their accounts being frozen didn’t have to lose the money, even though they were the ones responsible.

That’s like walking into a bank and receiving $100. They then give you $100,000. Huett stated that Huett doesn’t believe you have the right to such a generous sum.

Philip Kleinman is a New York City teacher in public schools. He also said the same thing as other CNBC customers: After the company freezes their accounts they are unable to access funds nor get customer support.

Kleinman is a Coinbase customer from around 2016. He said he called the support line but it took nearly three hours for him to give up. Kleinman stated that he needed access to nearly $4,800 GYEN he had invested.

Kleinman explained that this is impacting thousands of users and they all feel lost.

Lucas Bauer, an Army captain and physician’s assistant, said his investment was small – only about $400 – but what happened infuriated him.

He said that Coinbase had taken a stablecoin but did not declare it during their investment process. “When everyone [got]This one digital asset saw its price rise, when it was not supposed to. They stole everyone’s money and allowed its prices to rise. Now they take the peak of this price hike and presume everyone purchased it. Then, they strip everybody of all their money.

It was like ordering pizza.

Enter your credit card information. You order two pizzas for $19.88. You will receive 200 pizzas at $19.88 as your confirmation email. You can then proceed to the next step [the company] freezes all orders regarding pizzas – rightfully so. “But, since so many people ordered pizzas simultaneously, the prices went up,” he explained.

“So, four weeks later, when they try to fix the receipts, instead of the two pizzas you ordered for $19.88, you get four slices of one pizza – because they are keeping the rest.”

Email tips investigations@cnbc.com.

 — CNBC’s Jennifer SchlesingerAnd Angelica Serrano-RomanThis report was contributed by you.

Mike Robinson
Mike covers the financial, utilities and biotechnology sectors for Street Register. He has been writing about investment and personal finance topics for almost 12 years. Mike has an MBA in Finance from Wake Forest University.