Coinbase CEO: Former Hacking Team Employees Will Be Asked to Leave

Siamak Masnavi

Coinbase logo on white background.png

Brian Armstrong, co-founder and CEO at Coinbase, announced late Monday night (March 4th) that employees of Neutrino, the blockchain analytics firm it had acquired recently, who had previously worked at controversial Italian computer surveillance software company Hacking Team would be transitioned out of Coinbase.

Before we take a closer look at Armstrong's decision, let's have a quick recap of the background to this story.

On February 19th, Coinbase announced that it had "acquired Neutrino, a blockchain intelligence platform." Varun Srinivasan, the Engineering Director at Coinbase, explained in a blog post the motivation for this acquisition:

"Blockchain intelligence is increasingly important in the crypto ecosystem, and is necessary to achieve our mission of bringing the open financial system to the world. By analyzing data on public blockchains, Neutrino will help us prevent theft of funds from peoples’ accounts, investigate ransomware attacks, and identify bad actors. It will also help us bring more cryptocurrencies and features to more people while helping ensure compliance with local laws and regulations. Neutrino’s technology is the best we’ve encountered in this space, and it will play an important role in legitimizing crypto, making it safer and more accessible for people all over the world."

Coinbase's plan was for Neutrino to "continue to operate as a standalone business" based out of Coinbase's London (UK) office.

Neutrino's website says that it "develops solutions for monitoring, analyzing and tracking cryptocurrency flows across multiple blockchains," and that it develops solutions for law enforcement (namely, "XFlow nSpect" which "provides advanced, unique features for criminal investigations and intelligence gathering") and for financial services (namely, "XFlow nSight" which "has special features to support your compliance procedures by assessing the KYC/AML risk of your crypto-financial assets").

Unfortunately for Coinbase, Neutrino was founded in 2016 by Giancarlo Russo (Chief Executive Officer), Marco Valleri (Chief Research Officer), and Alberto Ornaghi (Chief Technology Officer), all three of whom are former employees of Hacking Team, a company that had been caught several times selling its "offensive technology" to some governments with poor human rights records).

According to a report in Motherboard on February 26th:

"In the early 2000s, Valleri and Ornaghi developed Ettercap, the software that was the foundation of Hacking Team’s technology. Giancarlo Russo, Neutrino’s CEO, used to be Hacking Team’s chief operating officer."

BREAKERMAG also confirmed in a report published on the same day the connections of these three individuals to Hacking Team:

"Neutrino’s CEO, Giancarlo Russo, is the former COO of Hacking Team. Neutrino’s CTO, Alberto Ornaghi, was part of Hacking Team for more than eight years, working his way up to CTO there. Another Neutrino executive, Marco Valleri, appears to have been part of Hacking Team starting in 2004."

Shortly after the crypto community found out about Neutrino's connections to Hacking Team, there was wide condemnation of Coinbase, and a #DeleteCoinbase campaign started on Twitter and other social media platforms. Here is one sample tweet:

 

Along with it, the #DeleteCoinbaseTrustChain campaign was launched. As the exchange doesn’t let accounts with dust (read: extremely small) balances get deleted, a chain was created so users send their dust to someone else, and then delete the account:

And last night, Coinbase CEO Brian Armstrong finally succumbed to all this social media pressure by publishing a blog post that said Coinbase wishes to "transition out" those employees of Coinbase who have/had previous ties to Hacking Team.

He started by pointing out that in order to work with the banking system, Coinbase had no choice but to "must implement a know-your-customer (KYC) and anti-money-laundering (AML) program, and a key part of those programs is blockchain analytics." He then explained the problem with using "outside vendors that provide blockchain analytics" is that they did not support all the cryptoassets that Coinbase wanted to have on its platform, and so decided to acquire a blockchain analytics firm in order to "bring this capability in house." 

He then acknowledged Coinbase's mistake, and said how Coinbase was going to fix it:

"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. This was not an easy decision, but their prior work does present a conflict with our mission. We are thankful to the Neutrino team for engaging with us on this outcome."

What is not yet clear is how much damage Coinbase has suffered to its reputation as a result of the decision to acquire Neutrino and to what extent Armstrong's response will be able to appease the crypto community. Already, there are some signs that the unrest is not going to end immediately: