KEY POINTS

  • An online petition filed against Coinbase has garnered 2,200+ signatures
  • The petition was filed by people who were locked out from their wallets
  • Coinbase cited technical issues for the glitch

Coinbase seems to be neck-deep in trouble as the United States' biggest cryptocurrency exchange has become the object of anger for thousands of customers who were locked out of their wallets. The customers are demanding refunds for the losses they have occurred on the platform. 

The story starts from the listing and trading of two cryptocurrencies on the platform: Powerledger (POWR) and GYEN. POWR was built in May 2016 with the goal of disrupting the energy industry by cutting off the middlemen in energy-related transactions. GYEN is a stablecoin whose value is pegged 1:1 with the Japanese Yen. 

In mid-November, Coinbase locked out several customers from their accounts, citing certain glitches arising out of "technical issues." The customers were locked out of their wallets for weeks and were unable to do anything with their crypto, incurring losses. It was not clear how many investors were affected and how much money was lost.

The incident serves as another reminder of how lack of regulatory scrutiny and guidelines make investing in cryptos a very risky proposition for the average investor.   

CNBC report that people impacted by the "glitch" expressed their dissatisfaction and anger. They have started an online petition for the same, which already has more than 2,281 signatures as of 12:26 a.m. ET. 

Data from CoinMarketCap shows that on Nov. 17, the price of GYEN stopped following the price of the Yen, to which it was pegged, and as a result, reached a price of $0.06564, which was 7.5 times higher than what it should've been. That also raises the question of trust that can be placed on stablecoins, which are used as a store of value when investors exit crypto holdings. 

Tether Holdings, the company that issues the stablecoin USD Tether (USDT), had come under a cloud over claims its virtual currency was fully backed by the U.S. dollar. Read a detailed report on that here.

"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," CNBC said in its report.

This transfer activity indicates that traders put money on GYEN when it got untethered to the yen, and droves up its price to capitalize on the gains. IT  was not revealed as to how many people lost their money or how many were actually able to capitalize from the same. 

POWR reached a monthly high of $0.9 and was down to $0.49 on Wednesday, nearly half the monthly high. Those locked out of their wallets were unable to exit as the price fell. 

"In the coming weeks, Coinbase will publish a blog post about the Nov. 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," Coinbase told CNBC.

Chris Fleming, the person who initiated the online petition, told CNBC that Coinbase held his money "ransom for two weeks."

"They need to give some solid, concrete answers, and they need to refund every single person who invested in this and lost money," he said.

Coinbase A revolutionary cryptocurrency trading platform. Photo: Coinbase.com