Coinbase Global Inc. (NASDAQ: COIN) has found itself at the center of major controversy as numerous investors say the company is refusing to return a significant amount of cryptocurrency to users, despite the exchange platform having access to the tokens.
What Happened: Coinbase is holding a significant number of tokens after numerous users deposited Wrapped Ethereum (CRYPTO: WETH) into the company’s Ethereum (CRYPTO: ETH) wallets, resulting in it not being accredited to their accounts.
Venture Capitalist Jeff Aronson told Benzinga that he deposited 123.49 WETH to his account, worth nearly $400,000 at the time (but just over $221,000 as of press time), with Coinbase refusing to take any action to recover the funds since the late March deposit.
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Wrapped Ethereum is just Ethereum represented by another token, with the same value but some features that make it a better fit for use in smart contracts such as non-fungible token (NFT) marketplaces or decentralized finance (DeFi) services.
Ethereum can be exchanged one-to-one for Wrapped Ethereum and Wrapped Ethereum can be exchanged one-to-one for Ethereum. But WETH is an ERC-20 standard-compliant token that allows for better management by smart contracts compared to native Ethereum.
This is a difference that is not obvious to new users, and Coinbase’s image as a user-friendly exchange caters to those users. This, combined with the influx of new users onto NFT marketplaces that pay out for sales in WETH was a recipe for disaster.
“When sending cryptocurrency to Coinbase, you must send it to the wallet address provided to you by Coinbase. If a user sends unsupported cryptocurrency to Coinbase then that cryptocurrency will be lost and cannot be recovered,” a Coinbase spokesperson told Benzinga, declining to delve into details.
Full story available on Benzinga.com