Bitcoin: Getting Cryptic with Coinbase

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bitcoin, by pixabay user MichaelWuensch, licensed by Creative Commons.

Coinbase off base?

The world of bitcoin and cryptocurrency is very… well, cryptic. The exchanging of “internet money” with fluid values that rise and fall is reminiscent of the stock market, without any government regulation. As more people learn what crypto is and how it works, there are going to be players that become the gold standard in the space. Unfortunately, there are also going be people who can find ways to profit from it. With no one to regulate what goes on, would it be possible for a “CEO” from a crypto startup to steal money from his own clients? This is the latest issue with the most popular cryptocurrency exchange platform, Coinbase, which is being sued after they failed to raise alarms about a money laundering scheme. The case is now going to a jury trial after the Eleventh Circuit Court of Appeals denied an appeal in district court.

The lawsuit was filed by a man named Brandon Leidel, who was an active user of a company / app called “Cryptsy”. This company is one of hundreds and hundreds of brand new start up & tech companies who are trying to provide the best user-friendly and smooth running bitcoin & cryptocurrency exchange platform. However, a company called Coinbase has already risen high among its competitors as the main crypto exchange service. The lawsuit claims that Cryptsy CEO Paul Vernon was using Coinbase to illegally launder millions of dollars from his Cryptsy business, and that Coinbase should be help responsible for not raising any red flags. The irony (and appeal) here is that cryptocurrency prides itself on its anonymity.

While not necessarily a landmark case, this does raise a very interesting issue. Is Coinbase really liable to report any type of strange or unusual activity that they could see as curious or problematic? Much of that depends on their user agreement, but the more broad question revolves around how safe and reliable bitcoin and cryptocurrency really are. The world there is still very much in the Wild Wild West; it is very possible that many people have already done what Cryptsy CEO Paul Vernon has done, although not actually using Coinbase. Trade at your own risk.