Topic: Coinbase honored my contract. (Read 8532 times)

I just received an email from Coinbase.

1) They have whitelisted me.

2) They are honoring our original contract of 9.25 btc for $1,945.07

At this point I am fully satisfied with their service and I will lock this thread.

I wish to thank Olaf for his personal care in this matter.

Pente

Exactly.  They canceled my order that was placed on 10/31, yet whitelisted future orders without any additional identity verification from me.  There is no way that had anything to do with KYC/AML.  If it was KYC/AML, there would have been no need to cancel the order.  The order shouldn't have even been allowed in the first place.  Instead, they decided to take my money, keep it for over a week, and then return it after a huge bubble in the price of Bitcoin even after I told them that my preference was to process the order.  I cannot imagine a legitimate KYC/AML reason for that behavior, but it's easy to imagine why they had a business interest in canceling my order.

I would like to see a modicum of evidence that suggests this has anything to do with KYC/AML restrictions. I have seen none to date.

Coinbase is shady as hell. Don't use them.

You're misinterpreting my point. I'll re-iterate:
Coinbase is not "scamming" for profit. Their observance of AML/KYC regs has resulted in the OP losing out on a profit, yes....but that's very different than Coinbase deliberately holding capital to profit from market dynamics. You guys are always accusing bitcoin companies of that; yet it's absurd. If a US-based company was doing that deliberately, they wouldn't last very long at all, for two reasons: 1) It's an idiotic business practice since it adds lots of risk but little profit to the bottom line (since you could only do it to the occasional customer without it being patently obvious), and 2) They'd come under fatal regulatory attack rapidly. The regulators would have an easy time prosecuting such practices (and would love to take the opportunity to trumpet "we're protecting the consumer!"). Bitcoin companies operating in the white-market are doing everything they can to avoid regulatory hassles. Sure, some may be incompetent, but again, that's a very meaningfully different issue than the company being malicious.

And to re-iterate, the ultimate source of these is issues is the attempt (successful or not) to comply with a very fuzzy and complicated set of federal and state-by-state AML/KYC regs.

Now please grow-up, make some attempt to understand the operational issues of these companies, and spare me your conspiracy theories.

file ripoff reports non stop.

It will be pushed onto the first page of Google.

I'd love too see where in the aml/kyc land it is good practice to flag a customer as "high risk" and then invite them to try again later without any additional verifications?

Trying to divert the topic.

The OP was clearly complaining about the practice itself.

I do not care if CoinBase is aggressive towards flagging transactions as fraudulent and cancels the transaction and/or returns funds in reasonable time.

You and every other white knight of CoinBase so conveniently skip over why it takes automated software 1 week to determine a transaction is fraudulent or why accounts that are flagged as "high risk" are even allowed to place transactions without additional verification. This would in fact go very much against the grain of KYC/AML. If they were to allow this and not give customers their instant gratification of purchase after instant linking bank accounts, they know it would shrink the growth of their customer base. So... they chose not to. This doesn't seem to be acting in good faith of KYC/AML does it?

There is a serious issue that CoinBase accepts transaction from accounts they flagged and then holds funds for one week or longer before notifying customer and the refusal to even attempt to work out transactions with the customer.


They are doing one of the following:
- Decided your account is high risk and accepted the transaction only to cancel 1 week later. Again holding your funds for 1 week + without the intention to even sell.
- Decided right off the bat that a transaction is high risk and NOT obtain any BTC from exchange for resell. Again, they hold your funds for 1 week + without intention to sell.
- Decided later on in the transaction AFTER the BTC was already obtained to flag the transaction as high risk. Absolutely no reason in this case as to why they cannot settle on the original transaction rate with the customer. This one in particular reeks of fractional lending for themselves against their own TOS.
- Could not obtain BTC off exchange at agreed upon rate + premium and hold your funds for 1 week +. In this case, "You will obtain your BTC by..." is patently false.

None of what I stated above, has anything to do with CoinBase' action in good faith to comply with KYC/AML/BSA legistlation. NONE whatsoever.

In fact, if they were truly attempting to comply with KYC/AML/BSA, they would not even be accepting transactions on flagged accounts. But they obviously are not.

Regardless of exactly how the Coinbase transaction was initiated and cancelled, the OP's issue is with US regulation, not Coinbase's business practices.

Money services businesses have to obey aggressive KYC and AML processes or face the possibility of huge fines or getting shut down. And the rules are pretty gray, leaving regulators plenty of leeway to interpret. Thus, a high-profile business with VC investment like Coinbase is going to be aggressive about identifying "high-risk" accounts so that they can show regulators they're acting in good faith, and that there's no basis for a regulator to say they were being intentionally slack. They are going to generate a lot of false-positives, and it really sucks to be one.

But that's where they're coming from: keeping regulators off their back; not scamming you for $1000. So lobby for changing the very onerous KYC/AML/BSA legislation instead of ranting on the company that's forced to obey such regs.

They did take his money. Even if they do not take your money, your money is still tied for the entire transaction as credit towards the transaction.

Also, in what world is adding and deleting bank accounts under the SAME NAME high risk.

I don't know of any company that has fraud management where, if an account is flagged, they will hold the transaction and customer funds for an entire week after they decided it's "high risk", refuse to attempt to resolve it, or even accept the transaction in the first place.

Edit: At least I don't know of any non-shady ones.

You can't be serious. Their support is abysmal. It takes 1week + for them to get back to you or they completely ignore you.

When they do get back to you, it's the usual copy and pasted response "We're sorry you had trouble doing *some action*..." and no actual attempt to resolve the issue.

My experience:

I tried to verify my bank account through the non-instant method. After multiple calls to my own bank, I verified with my bank that CoinBase only ever debited me and never credited me.

I sent an email to support. It took 1 week to get back to me and they told me to verify with my bank again. I took their request and verified with my bank a second time and sent them an email back. One and a half weeks later I still get no response. I eventually decided to use the instant-method.

2 days AFTER I had verified, I finally get a email back from support saying that they see I had verified my account. I sent an email back to them specifically stating that the original verification method failed due to errors on CoinBase' part and was concerned about future issues I may run into with the account. I never did get a response back about this email.

Of course after I made my first purchase and BTC went from 140-220, my transaction is canceled. After a month of going back and forth with them, they threw the TOS in my face.

When I decided to make a purchase, I read through their TOS. First thing I noticed was the "high risk" transaction. Their definition of "high risk" transaction allows to categorize EVERY transaction as high risk so they can chose what to cancel. Usually companies do this as a CYA, but they are actively screwing customers with this.

They do not make their purchase process clear either. Once you purchase the BTC and a popup comes up saying "You will receive your BTC by...", you assume you would receive your BTC and that the transaction was approved. However, in fact your transaction has not actually been approved and just put in purgatory for a week.



The best part is this blog post by CoinBase CEO:
http://blog.coinbase.com/post/44046687068/high-risk-transactions

Statements posted here contradicts certain parts of CoinBase' own TOS. And makes believing in their story absolutely ridiculous.

Take for example:
Why does it take the automated system 1 entire week to determine if a transaction is fraudulent? 1-2 days would be believable if bank transfer requests get denied. Instantly would be believable too if the automated system thought that the bank account was linked fraudulently. There is absolutely no excuse for 1 week.

To further support this:
Coinbase themselves know of the high volatility of BTC. It's right in their TOS. This would mean they would know they have to obtain the BTC quick once a transaction goes through. Again, there is absolutely no excuse for a 1 week wait if they can determine 97% of a batch of transactions is non-fraudulent right off the bat.

Then take their TOS:
This is an absolute load of crock. This contradicts the quote from the CEO in his blog post "For example, if we have 100 bitcoin of purchases and estimate 3 bitcoin are fraudulent, we only buy 97.". In addition every time BitStamp goes down, tickers/buy/sell all stop working. It's a well known fact by now that when a customer starts a transaction, that the customer is giving money to CoinBase and CoinBase is using that money to obtain BTC from BitStamp to resell to the customer.

Now my favourite part of the TOS:
CoinBase may not be doing fractional reverse lending with BTC, but they sure as hell are with customers money. If they were able to determine a transaction was fraudulent or unable to obtain BTC at the agreed rate from an exchange at the time of the transaciton, there is NO excuse for holding the the funds or the pending transaction over the customer for an entire week.

Sign off bit from CoinBase blog post:
Apparently not because it has been a serious enough issue to  get addressed in a blog post all the way back in March. There seems to be increasing number of complaints. And back in July CoinBase changed the TOS such that you no longer have to try to work out any of these transactions with your customers. This doesn't seem like any sort of improvement at all. I think CoinBase is rather going in reverse.

Regarding them accepting orders, then later denying them for high risk... I don't think coinbase is a scam, but rather they just do a lot of stupid things.

Rememeber when they just sprang the policy change without warning where you had to add a credit card (not a debit card, but a go-into-debt credit card) to continue getting the instant purchases? The only mention of it was on their support site, in small letters in the news section. Everyone just freaked out about it. Nevermind that nobody else offers you the ability to buy bitcoins, and gives you the coins before the ACH transfer goes through. Even paypal doesnt do that.

So this reeks of them just being stupid. They probably just set up some automatic fraud detection thing, and just figuring all they have to do is deal with customers case by case when it gets it wrong. Great plan, right? They are just being STUPID, and not realizing the damage to the brand that kind of thing does.

Hey Olaf, if you're reading this, I suggest instead of having it cancel the order, put it on hold for review. Then encourage the customer to contact support. Just saying transaction cancelled makes people feel ripped off. Yes, fraud is a big problem, but there has got to be a better way than just cancelling the order.
People use coinbase like an exchange, and if they can't trust that they can buy some coins from you without worrying about you just randomly cancelling the transaction, that only gives opportunity to the competition.

So far in my own experience, support has been very responsive, and I would definitely raise hell with support if I got flagged for fraud before making a new post on bitcointalk just trying to smear them.

I urge everyone to ignore any complaints about coinbase.com unless it includes a statement like "I contacted support about it and ____". At least give them a chance to make it right first before skipping to telling everyone they are a scam.

@danieldaniel, you are correct in saying that the original $1,945.07 is still in my bank account. Regardless, the money was still tied up for a week. I could not use it to make a purchase elsewhere. Coinbase was able to capitalize on that fact to make gains on the bitcoins that they purchased for me and held during that week.

I never said anything about deleting bank accounts and have never deleted a bank account with Coinbase. That being said, Coinbase has deleted my first account three times. Each time it was deleted after I attempted to make a buy. The fact that you know this (when I didn't mention it) makes me strongly suspect that  you work for Coinbase. Do you?

Testing Coinbase with small purchases (0.25 btc) makes perfect sense if you know that there are problems with making a purchase. There is no reason to tie up large amounts of money until the software glitches involving a bank transferring money to Coinbase are solved. This is not behavior that indicates fraud, it is the behavior of a person dealing with a dysfunctional system.


This is really the meat of the issue. There is a right way and a wrong way to manage fraud.

The wrong way is to put all the losses on the customer while Coinbase gets to capitalize on the gains. Breaking a contract 7 days after a purchase is made is dishonorable.

The right way would be to either: (a) hold the bitcoins bought till the danger of fraud has passed  (b) lower the amount of the possible transaction to the level of trust in the customer (c) transfer the funds to Coinbase, then allow the customer to make a purchase after the funds are secure.

Coinbase should honor my original contract of 9.25 btc for $1,945.07

FWIW
https://bitcointalksearch.org/topic/m.3524591

Yes, they did take his money.  They did the same thing to me this week.  They debited my account on Monday and then canceled my order for being "high risk" on Wednesday.  I emailed support, but at this point I have neither my bitcoin nor my USD.

Please tell me what non shady company after thinking a customer is high risk would tell them to try again?

I don't think of them as shady. I do think they have a reason to believe he is "high risk" because of what he mentioned.

OP, don't worry, they will send you another email after Bitcoin crashed to tell you that this was an error and your purchase was in fact effectively processed.

Is your computer booting right into a mail client?

Coinbase does this all the time and is frankly shady as hell. I would never touch them, and I would never recommend them to anybody. It doesn't help that they are so newb-friendly, as all this new blood do not understand that with Coinbase, they do not control their own bitcoins -- Coinbase does.

I think there is a right way to do this and most large PM dealers do this.  It should clearly state on the website that when you send us money your purchase price is not locked in.  Then after they do the fraud verifications they can credit the account of the buyer and then you can buy whenever and at whatever price you want with cleared funds.  While there is no way to know if coinbase is actually scamming this money.  The practice is very scammy.  I would suggest any users who had this happen to them to use the small claims court to at least get to the bottom of the practice.  It's a simple question if they procured coins at the time of purchase or they did not.  If they did then any subsequent gains or losses belong to the customer.  If they did not then that should be clearly indicated on the website otherwise it's false advertising since they are selling something they don't have yet.