Coinbase Head of Sales Christine Sandler shocked much of the cryptoasset industry and community over the weekend, by divulging during an interview that analytics contractors (Chainalysis at least) within the company’s employ had been selling customer data.
It was really important for us to migrate away from our current providers [...] [They] were actually 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 admission, when talking to Cheddar while discussing Coinbase’s recent XRP listing (see below), has created a firestorm on crypto social media - adding to the already rolling #DeleteCoinbase hashtag campaign which has manifested during an almost impressive run of negatively-received events surrounding the multi-billion dollar crypto company.
YOU DID WHAT?!?!— Udi Wertheimer (@udiWertheimer) March 3, 2019
A @coinbase official responds to #DeleteCoinbase by saying they had to acquire Neutrino because their previous tracking provider SOLD COINBASE CUSTOMER DATA TO THIRD PARTIES
And that’s why we should trust the people you choose to do business with?!?! https://t.co/XBb3ncHmxI
CryptoGlobe reported some days ago on Coinbase’s acquisition, which set the revelations in motion. In short, the exchange acquired Italy-based Neutrino analytics firm, whose founder has a murky background producing spyware for human-rights-abusing governments.
What a pathetic response from conbase. "We know we hired criminals, but not to worry, they have good tech." This is what happens when you hire nocoiner losers to fill your company ranks. So out of touch it's hilarious. #DeleteCoinbase https://t.co/ZXypmIJoc9— Austin E. Alexander #deletecoinbase (@BTCismoney) March 3, 2019
Responding to this revelation, Sandler said that Coinbase were “looking into [Neutrino employees’ backgrounds],” and offered the explanation that Neutrino offered “industry-leading, best-in-class technology.”
Re @Coinbase data:— Ryan Selkis (@twobitidiot) March 3, 2019
1) Got a wallet? Assume it's tracked by AML vendors like @chainalysis & @elliptic.
2) If they switched to "give-get" data policies, it means Coinbase had three choices: a) buy a competitor, b) break US law, c) help create a surveillance mesh.#Context https://t.co/YeM8n1IbM3
But even on this count, Coinbase is drawing criticism. Kraken CEO Jesse Powell posted hours ago that his own research staff rated Neutrino very low among possible options.
I asked our Compliance team what they thought of Neutrino. Fortunately, they'd just completed an evaluation. Neutrino came in last place on product (out of the 5) but was disqualified anyway due to the risks. However, other factors are important in M&A: cost, culture fit. pic.twitter.com/kiYh11GEBc— Jesse Powell (@jespow) March 3, 2019
Although some are clearly outraged to learn that Coinbase have sold their user data, plenty in the industry were not at all surprised at the admission. Mike Dudas of TheBlock called it a “widespread practice within the [cryptoasset] industry.” He also pointed out that Coinbase’s collaboration with Chainalysis (who presumably here bought the data) was already known back in April of 2018.
In announcing their Series A in 2018, @chainalysis made it very clear that their work for @coinbase and @circlepay had helped those two exchanges gain legitimacy to work with @Barclays https://t.co/23wjjtHCS7 pic.twitter.com/jRkK8KOH2R— Mike Dudas (@mdudas) March 3, 2019
Fuel to the Fire
As mentioned above, the Neutrino and subsequent revelations are just one in a series of recent negatively-received press for the exchange.
Recently making the rounds in crypto-media was the discovery that Coinbase offers an optional cloud backup of users’ private keys, to Google Drive and Apple iCloud. Such a possibility incensed many on crypto social media, as many saw this as antithetical to the principles of crypto - perhaps unfairly, owing to Coinbase’s user-friendly reputation.
@coinbase Is this an early April fool’s joke? Why would you recommend storing your private keys on the cloud? That’s not safe whatsoever.— CryptEkim (@CryptEkim) February 12, 2019