Coinbase customers demand refunds after crypto freeze

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CNBC Television published this video item, entitled “Coinbase customers demand refunds after crypto freeze” – below is their description.

CNBC’s Eamon Javers reports on Coinbase customers demanding refunds over activity in a stable coin called GYEN, which is tied to the Japanese yen. For access to live and exclusive video from CNBC subscribe to CNBC PRO: https://cnb.cx/2NGeIvi 

Outraged Coinbase users have launched an online campaign demanding the cryptocurrency exchange refund their losses after a technical problem led the company to freeze accounts for weeks, potentially locking in large losses for many customers.

Coinbase told customers a glitch in trading of two cryptocurrencies in mid-November was due to “technical reasons.” Now many of those customers are blasting the exchange for locking them out of their accounts and, they say, improperly taking their funds.

The issue occurred in mid-November when Coinbase customers were able to buy GYEN, a stablecoin that is pegged to the value of one Japanese yen. Also involved in the mishap was POWR, a cryptocurrency designed to be used in energy trading.

The dispute highlights the risks to millions of individual investors plunging into lightly regulated new cryptocurrency markets, where rules of the road and relationships between exchanges and customers are still being worked out. 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.

GYEN was listed on Coinbase for the first time on Nov. 10, according to the crypto analysis firm Chainalysis.

Beginning around Nov. 17, the coin somehow became untethered to the yen price it was supposed to be targeting. Chainalysis says it leapt to a high of 0.065643, which is about 7.5 times higher than the fiat equivalent investors thought they were getting.

According to Chainalysis, transfer activity to Coinbase accelerated beginning Nov. 18 and peaked the following day at $122 million. On the flip side, transfer activity from Coinbase peaked on Nov. 20, the firm reports, with the volume transferred from Coinbase on that day representing 84% of total transfers.

It is unclear how many customers were involved, how many suffered losses, or how many were able to capitalize on the sudden spike in price and sell before the price crashed again. The coin is now trading at the intended yen peg level.

The company said in an email to some customers obtained by CNBC that “between 15th – 19th November 2021, GYEN on Coinbase experienced unexpected behavior due to unusual market conditions. On 19th November, this was further complicated and for technical reasons, Coinbase disabled trading for GYEN.”

“For customers trading with GYEN up until 19 November, this may have resulted in decimal display issues for transactions (displaying 100x greater than or less than what was actually purchased or traded based on the exchange rate confirmed at the time), while the wallet balance accurately reflected the amount traded,” the email said.

Coinbase told one customer in an email that as a result, “all buys, sells, trades, sends, and receives of GYEN and POWR have been temporarily disabled on Coinbase.com and Coinbase Pro while we work to correct this. 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.”

Asked what actually happened and how complaints would be addressed, a company spokesperson told CNBC: “In the coming weeks, Coinbase will publish a blog post about the November 19 event involving GYEN and POWR assets. Both GYEN and POWR have resumed trading on Coinbase Pro and withdrawals are enabled on Coinbase.com. Our team continues to work around the clock to restore full trading on the Coinbase retail app and to respond to customer inquiries about this issue. Coinbase has no further comment at this time.”

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