Consumer complaint received 2018-02-17
Company: Coinbase, Inc.
State: NC
Product: Money transfer, virtual currency, or money service
Sub-product: Virtual currency
Issue: Confusing or missing disclosures

Complaint:
Timeline and overview of events : On XX/XX/XXXX, XXXX briefly opened trading of Bitcoin Cash on their exchange. During this period of time, the market was extremely volatile, presenting an opportunity to make highly gainful, short-term trades. Of course, one can lose money quickly in these situations as well. Being an experienced trader in the cryptocurrency market gives me an advantage on how to approach these situations, so I decided to make a few trades. 

My first trade was a market order to buy {$14000.00} worth of Bitcoin Cash at {$5000.00}, resulting in a balance of XXXX BCH. I then sold that Bitcoin Cash in a limit order at {$5200.00}, to obtain a USD balance of {$15000.00}. My second trade was a limit order to buy {$14000.00} worth of Bitcoin Cash at  {$6300.00}, resulting in a balance of XXXX BCH. This is where things went downhill. Bitcoin Cash continued to rise significantly in value on XXXX as there was not much selling resistance. In order to control this market volatility, XXXX decided to halt trading of Bitcoin Cash on the exchange at XXXX PST with no advance notice, just 20 seconds after my order to purchase Bitcoin Cash at {$6300.00} was filled. At the moment of the trading halt, the last trading price of Bitcoin Cash had reached {$9500.00}. Generally, when trading is halted for technical reasons or otherwise on XXXX, it is resumed in a timely fashion to maintain market activity. A large consolidation of " post-only '' buy and sell orders had consolidated around {$8500.00} after the halt in anticipation of the market potentially reopening. However, XXXX realized that they had made a mistake of not giving enough advance notice to add Bitcoin Cash to the trading platform, so they decided to cancel all orders and reattempt to open the exchange in a " fairer '' manner the next morning. Unfortunately for me, I was stuck with XXXX BCH that was purchased at an extremely overpriced/inflated value and was unable to do anything in the meantime. As I mentioned before, my intention was never to engage in long term trading of Bitcoin Cash. In fact, my initial trade where I bought Bitcoin Cash at {$5000.00} and sold at {$5200.00} lasted less than a minute. 

So in order to attempt to resolve this in a fair manner, I opened a support ticket explaining my situation. Knowing that the support ticket would take awhile to get resolved and I was going to be on flights all of the next day, I woke up early to call Coinbase on their phone line. After being on the phone line for an hour, I was connected with a representative, explained my situation, and was told that they couldn't directly do anything to resolve the case, but that it would be set as a " high-priority '' case that would be handled by a specialist. I asked for a timeline and they could not provide any timeline to resolution. I asked another question about another case that I had that was open for a few weeks at the time and was put on hold, but the call disconnected immediately as it was put on hold, so I hate to make assumptions, but it looks like I was hung up on. 

As I was given no direction as to where the case was going and/or how long it would take to resolve it, I made the decision to sell my Bitcoin Cash at the opening price. As I was going to be in airports all day traveling, I had to quickly put together a trading bot to sell my Bitcoin Cash for me, which was stressful and I ended up in a position that was particularly suboptimal. The best price that I was able to sell my XXXX BCH at was {$4300.00} in a market order, which resulted in an approximate trade balance of XXXX {$9600.00} after fees. Just to reiterate, I had purchased that same Bitcoin Cash the previous night for {$14000.00}. 

After not hearing anything for about 3 weeks, I made another call to Coinbase on XX/XX/XXXX. Once again, I was on the phone waiting for over an hour for an agent to pick up. I asked for a simple status update, was told I was going to be put on hold while they looked into, but as soon as the hold was placed, the call was disconnected. Also once again, I hate to make any assumptions, but I am led to believe that I was hung up on. 

Today, XX/XX/XXXX, I called Coinbase again hoping they would have some information for me on this case. I was on the phone waiting for an agent for almost an hour and a half. This time I didnt get disconnected, but the agent wasnt able to provide much more than to open up a new case and raise that case to a specialist without any timeline for resolution. 


Evidence against XXXX : Firstly, XXXX has issued a retrospective statement effectively admitting that they handled the rollout of Bitcoin Cash on their platform in a manner that was not appropriate. That statement can be found here https : XXXX. Although there was never any clear admission of guilt ( likely for legal purposes ), they did say the following : Despite our best efforts to create a fair and orderly market, the launch did not go as expected and we understand why many of our customers and members of the community are upset. Despite this, they have not made any effort to compensate those affected by the premature launch. 

Second, despite my spending many hours dealing with this situation and attempting to get more information, this case seems to have gone nowhere. Ive been disconnected and arguably hung up on twice by Coinbase customer support. The support ticket has not had any progress, and I have never been reached out to by a specialist. 

Lastly, and most importantly, the decision by XXXX to halt trading of Bitcoin Cash is a direct violation of their own Trading Rules as outlined in the following document : https : XXXX. Because this is a living document, the numbering and rules have changed multiple times since the case was opened. Notably, at the time of writing this, section 2 of the Trading Rules deals with Market Integrity. Rule ( 2.12 ) specifically says, XXXX does not use artificial market integrity measures  such as circuit breakers or trading halts. This rule, in clear and plain text, explains that XXXX  does not use trading halts to preserve market integrity. This is precisely what they did on XX/XX/XXXX with Bitcoin Cash. To preface whats next, section 2 of the Trading Rules was previously section 3 and rule 2.12 used to be rule 3.11. On XX/XX/XXXX, it appears that XXXX made an attempt to cover up their legal responsibility in this incident by amending rule 3.3. An archive of this amendment archive can be found here : https : XXXX. Rule 3.3 is now rule 2.4 and states the following : XXXX Market Operations has the authority to take any action deemed appropriate to preserve market integrity. Such actions include, but are not limited to, the halting of trading, modifying risk-mitigating parameters, restricting Trader access to XXXX, restricting order types to post-only or limit only, canceling orders resting in the order book, or any other actions deemed to be in the best interest of the Exchange. So, in rule 2.4 they explain that they can take any actions they deem appropriate, which includes the halting of trading. However, rule 2.12, states the contrary in that they do not use trading halts to preserve market integrity. 

With all of this in mind, I believe it is clear that Coinbase/XXXX is at fault in this case.

Company response to consumer: Closed with explanation