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Comment by root_axis | Hacker News Reader

> they have both insurance coverage and FDIC coverage on all accounts makes me much more likely to refer people interested in starting w Bitcoin there than anywhere else.

Very misleading statements.

The FDIC coverage does not include any bitcoin wallets. The bitcoin insurance only covers their hot wallets (something like 2% of all the bitcoin they hold). Yes, cold storage is a bitcoin security best practice, but it obviously does not eliminate the chance that a breach could occur, and if it does, none of that 98% is covered.

With that said, to Coinbase's credit, they haven't been hacked yet, which is actually quite an achievement considering the landscape.

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> With that said, to Coinbase's credit, they haven't been hacked yet, which is actually quite an achievement considering the landscape.

They have been victims of massive USD chargebacks. I think Coinbase is bleeding so much money to chargebacks that co-founder Fred Erhsam figured out company is never going to turn a profit and resigned.

I thought AHC transfers were very difficult to get chargebacks on. How much could they actually be losing on these events? Are they actually not that rare?

The ACH system in the US is rough. It operates on the theory of "success in absence of failure/chargeback." In most cases, this is fine. You use ACH to pay your rent but charge back? You get evicted. Use ACH for your mobile phone bill and charge back? Your phone gets shut off.

With easily transferrable assets it gets tough. The charge back window is on the order of 30+ days.

You buy BTC via ACH at $X and a week later it's $X/2? Chargeback "I was hacked!". You can fight it as the merchant, but it takes time, tons of documentation, and dealing with traditional bank compliance departments that a) don't know what BTC is or are trained to distrust it, b) are trained to protect their customers, c) are overworked, and d) have no vested interest in resolving it correctly irrespective of evidence.

They are pretty easy to chargeback as long as you initiate it within 30 days of your first transfer. Give a notarized letter to your bank stating that you did not do these ACH transfers to this "Coin Base" company.

You can get ACH charged back for up to 180 days with more involved procedure.

When your bank figures out that you're probably full of shit, are they likely to terminate your account and/or report you to the police for fraud?

Terminate, yes. Report you to the police, not sure.

Chargebacks for small amounts are often paid by the bank itself because it's cheaper than actually disputing with the merchant, so banks will certainly terminate accounts of customers who abuse that.

I've heard in most cases, banks don't bother investigating / pursuing (credit card) fraud for amounts <$10K.

Paypal turned that around, so in theory it's possible for Coinbase to do the same.

PayPal turned it around because they are a fiat-only company.

Coinbase is a Bitcoin-Fiat company, and fiat is reversible while Bitcoin is irreversible.

My understanding is that Paypal eventually developed a system to prevent fraud; they didn't just revert all fraudulent transactions. If Coinbase can eventually prevent fraud then irreversibility doesn't matter.

If their chargeback rate was as high as you said it is, they would be kicked off of the acquiring networks (visa, mc) and be prevented from opening merchant accounts.

Completely unfounded nonsense. Their profit margin is much higher than the fraud rate (as others pointed out, if fraud was as high as you say, banks would have shut down the relationship years ago).

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