High risk transactions
blog.coinbase.com
Cancelled orders on CoinBase is going to kill their business. New customers are unhappy and the post does not make sense as the users are verified and money is withdrawn from their account.
blog.coinbase.com
I've been corresponding with support over the past four weeks and still haven't seen a dime. Support generally takes 4-5 business days to respond to each email. I understand that their support staff is extremely limited, but it is still unacceptable, especially because they're dealing with monetary transactions.
However, I contacted the support department, asked them to explain themselves politely, offered to place a reserve amount in my account, and they immediately offered to "white list" me and promised this would never happen to one of my transactions with them, ever again.
I passed the "human, DBAA" test (breaking bad reference), I guess. If people like me go around telling about this policy, I would expect it to be less effective (or stop altogether) but as soon as this exchange was over, I was glad it had occurred. After reading the article though, it sounds like they are basically transparent about it, and my experience was not at all unique.
What does coinbase have disjoint against other Bitcoin Exchange services? Well for one thing, there are no bid-ask spreads, you are trading with coinbase.com alone. They should be able to reject your transaction at any time, full stop. Two, they don't carry USD deposits (except in your case? I have a feeling you've been too patient with them!) which means what exactly, I don't know, I am not a lawyer, but my question to you would be... have you done any further business with them? Did you take any steps past e-mailing?
I would have a certified, registered, return-receipt requested letter from my lawyer at their office two weeks ago already, if I were you. Maybe you really did trigger their fraud detection, and they are just waiting for the legitimate owner of "your account" to come and claim his USD or bitcoins.
In your case especially, I would say they now owe you 10 bitcoins at the market price four weeks ago, and a sincere letter of apology.
...I'm really glad to hear that Coinbase is not out there shafting people on purpose!
Instead, we are left wondering if Coinbase is selectively cancelling transactions that they can make a profit off of (due to the volatility of bitcoins)
For a given time period
* Mark transactions as 'high risk' at random
* Prefer transactions which buy coins from the user at low prices and sell coins to the user at high prices
* Randomly cancel a subset of non-preferred transactions after you've seen the market move over your time period
* Profit
If you do this right, canceling transactions is like having a price oracle, you can profit with 'future knowledge' by leaving some transactions open for extra seconds/minutes/hours/days.
I don't think the average HN user appreciates the risk environment payments companies work in. Imagine if a criminal gang organized enough to have a payroll had ten copies of people who were every bit as good at app security / financial risk management as e.g. Thomas, with two of them whose only marching orders were "Probe payments sites every day, quietly, and tell the team when you find one which is weaker than it could be. We will then conduct several months of quiet R&D on a software product which is more elaborate than that shipped by most YC startups. Our 'launch' will be deployment of that software product against our adversaries at the payments company, and it will blitz them so fast that by the time anyone thinks to pull the plug we'll be millionaires. Then we'll celebrate our good fortune until we do it again next week, to them or another company as circumstances dictate."
(Risk management, which a lot of startups need, is a high-leverage and very fun environment to work in. At present a lot of companies, large and small, custom build systems out of bubblegum and duct tape. If you get good at this you'll have a very rewarding career ahead of you, for many definitions of the word rewarding. I used to want to go into it but got sidetracked by the unexpectedly high amounts of leverage you can get using software to sell software.)
They're not alone. There isn't a single Bitcoin exchange in the world right now compliant with U.S. money transmission laws.
Buyer/seller beware.
Full disclosure: we're in litigation over this.
http://www.scribd.com/doc/139975904/Aaron-Greenspan-lawsuit
In which case you are the Plaintiff suing these companies which is very different than the US government suing them.
Not true, look at the docket.
REQUEST FOR CIVIL LOCAL RULE 3-9(b) EXEMPTION AND RETIREMENT
This complaint is not signed by a member of the Bar of
this Court and Plaintiff is a corporation. Civil Local
Rule 3-9(b) requires corporations to retain counsel...So, you are agreeing to spend a given amount of USD to acquire BTC, but the price is not fixed and you actually don't know the number of BTC you'll be getting until their calculation of the market rate occurs, five days from now. I had the same experience as the person in Coinbase Blog, they white-listed me, now I have an expectation that they will deliver on their promises.
Before that, I don't think I ever did (or had any reason to.) Some company on the internet is agreeing to take my bank details and make a withdrawal from my bank account, but what happens next is anyone's guess.
(A thought exercise: what is it exactly about letting 5 days pass before that makes it safer for Coinbase to part with a sum of bitcoins when a bank transfer is completed? The owner of the account has had zero opportunity to contest the charge as fraudulent, and those bitcoins go "at-risk" on that day when the transaction is completed. If there is a run on bitcoins, how does Coinbase guarantee they will be able to satisfy all of the orders they've accepted?)
I don't know what algos they use to detect fraud but being a veteran does not always mean there won't be fraud on your bank account. Remember, this is not about those five 10 dollar transactions you authorized, this is about that one 5 thousand dollar one that was the result of fraud. From their point of view, a false positive is much better than a false negative.
You want to show up with cash, not a check.
If you buy something online for example and you don't get it, you can call them up bitch about it and they refund you, and in worse case if they are jerks and you used your credit card you can dispute.
With bitcoin, once transfer is done from one account to another account, the transaction is not reversible. Since bitcoin addresses are anonymous, you don't know who it went to so there is no way to track and reverse the transaction like we do with refunds and voids.
However, his explanation doesn't make sense anyway. The concerns he raises are about fake accounts and having them to pay exchange to purchase the coins before they actually withdraw money from your account, which is taking a risk on their part to be able to secure the coins at the price you purchased. However, this is not true either. I had my orders cancelled back to back even if the money was withdrawn from my bank account. What risk? I don't know. Perhaps they made money from not granting me the coins that were doubled in price since last week.
I've heard Europe is significantly better in this regard.