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The Coinbase scandal: why Coinbase bought a dubious startup

When one of the leading Crypto exchanges acquired a startup with a dubious reputation, the cry of the crypto community was huge. But maybe not big enough.

In addition to the acquisition of the dubious startup Neutrino and the involvement of some of its employees in the sale of spyware to governments, it came to Coinbase obviously a gross security breach. In an interview, an employee of Crypto Börse revealed that customer data was sold to third parties.

Learn all about the Coinbase scandal, which is still not talked about enough.

It all started with the acquisition of Neutrino by Coinbase

Already on 19 February Coinbase officially announced that the Crypto Exchange has acquired the startup Neutrino. The official reason for this was that Neutrino is only part of a broader project to offer more different crypto assets across borders.

According to Coinbase’s Engineering and Product Director, this step is particularly important as the Crypto Exchange works with regulators and agencies in different countries. He added that Neutrino will help Coinbase “identify which new tokens are gaining value and gaining ground in space.”

The acquisition of the analytics startup will help Coinbase explore new assets. At the same time it can be ensured that the Crypto Exchange can identify unwanted activities such as theft without passing on internal information to external companies.

The move comes just weeks after the Israeli blockchain analytics firm Whitestream identified a Coinbase account that transferred Bitcoin donations to the Palestinian military-political group Hamas. Hamas is classified by the US government as a terrorist organization.

An internal analytics platform will enhance Coinbase’s capabilities to ensure regulatory compliance and work with regulators on issues across the space.

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Coinbase users delete their accounts due to the dubious reputation of Neutrino

Course after the takeover of the Blockchain Analytic company sounds the battle cry #DeleteCoinbase through the widths of Twitter. Coinbase users are dropping their accounts on the stock exchange, publishing as proof a picture of the successful deletion and calling more users to do the same.

Well I really could not stay behind now I could? Even though I have not used them in quite some time … #DeleteCoinbase pic.twitter.com/PJr7TXE052 – WhalePanda (@WhalePanda) March 1, 2019

But why are these users ever upset that Coinbase has acquired Neutrino?

Normally, such an acquisition would not make waves. But Neutrino is not an average startup.

The company was founded by three former employees of the Hacking Team, a controversial Italian surveillance provider. They are said to have sold spyware to governments like Ethiopia, Saudi Arabia and Sudan several times in the past.

Francis Pouliot, cofounder of the Canadian company Bull Bitcoin, bluntly rewrote it in a tweet and called the hacking team a “pro-government mercenary hacking company that provides Saudi tools / advice on the detection / elimination of dissidents.” His advice to all users of Coinbase is to take their feet in the hand and to go the distance.

Coinbase acquired Neutrino, built for government to track / deanonimize bitcoiners. Founded by 2 co-founders (CTOs) + former COO of Hacking Team, a pro-government mercenary hacker firm that gave Saudis tools / consulting to track / eliminate dissidents 🕳️🏃RUN! Https: //t.co/Enqu9HOjOg – Francis Pouliot 🐂₿ (@francispouliot_) February 20, 2019

In fact, the Washington Post reported that the hacking team worked directly with the Saudi Arabian government. The cooperation is said to have included the Enforcement Commission, which allegedly murdered dissident journalist Jamal Khashoggi.

The startup’s website described its products as “offensive technology”. According to the motherboard, her spyware will also have been used to monitor and arrest journalists in Ethiopia and the United Arab Emirates.

Coinbase knows about Neutrino’s past

In a statement to The Block, Coinbase states that they understand that the co-founders of Neutrino previously worked in the Hacking Team, which they reviewed as part of their security, technical and hiring tests.

Furthermore, Coinbase announced that it will not approve of the hacking team’s actions and will not defend it. However, it is important for Coinbase to implement this feature internally to fully control and protect their customers’ data. Neutrino’s technology is the best they’ve ever seen to reach that goal.

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Coinbase also states that significant efforts are needed to understand the flow of cryptocurrencies and to manage risks across public block chains.

Furthermore, they are proud that they have long agreed on a compliant, regulated cryptocurrency exchange with the obligation to protect the right to privacy of their customers.

All the more shocking was the admission that customer data from Coinbase users was resold to third parties.

Neutrino was necessary because Coinbase customer data was resold

Coinbase’s International Sales Director revealed the real reason for buying Neutrino in an interview with Chedah. Your current provider should have sold customer data to external sources. For Coinbase, it was therefore imperative to gain control over it.

It is still unclear what data was stolen and when exactly this happened. So far there has been no official comment by Coinbase on the breach of privacy.

Crypto-influencer and creator Tone Vays was shocked to find on Twitter that Coinbase could have endangered the lives of early Bitcoin adopters through this vulnerability.

WOW, did not know this in the AM when i did my video. Holly Shit @coinbase !!! Did you just put early #Bitcoin Adopters Lives at risk? Thank god I knew that I would like to stay clear of your company. https://t.co/O80Qsc0wW4 – Tone Vays [#Unconfiscatable] (@ToneVays) March 3, 2019

In fact, the scandal surrounding Coinbase raises many questions. Some of them are: How did this data theft happen on Coinbase? What kind of information has been shared? Which users are affected? To whom was the data sold and for what purpose? To what extent will Coinbase eventually monitor its customers through Neutrino technology in the future?

It should be clear that this story still has a sequel. First, because Coinbase has announced to look into the dubious past behind Neutrino. Second, because the loss of user data on Coinbase can not and will not be left in the room.

What do you think about the Coinbase scandal? Do you own an account on Coinbase?

Published inStartups

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