Top US crypto exchange Coinbase has listed at least 20 cryptocurrencies while holding financial interests in related products, reports Financial Times (FT).
Of those digital assets, only 12 were publicly disclosed on Coinbase’s website page dedicated to its investment arm.
A number of the cryptocurrencies in question reaped big rewards on listing day but subsequently fared worse than Bitcoin and Ether.
One example is Decentralized Social (formerly BitClout), the blockchain project run by one-time stablecoin issuer Nader Al-Naji.
Al-Naji rebranded Decentralized Social last September — an apparent bid to distance the startup from a series of technical snafus and cheap marketing ploys that drew widespread criticism.
At the same time, the US-based entrepreneur disingenuously attempted to pass off Decentralized Social’s DESO token sale, which ran from late 2020 until June 2021, as a fresh $200-million funding round led by venture capitalists like Andreessen Horowitz and Coinbase Ventures.
In reality, venture capital firms are reported to have contributed only half of the project’s funds.
The rest came from a mix of industry insiders and retail buyers over the course of approximately nine months — a far cry from any “traditional” funding round as purported by Al-Naji.
Coinbase listed DESO token in December. The news, which many had expected since Al-Naji plastered Coinbase Ventures’ branding across his website, briefly doubled DESO’s price.
This opened avenues for investors to capitalise by dumping their tokens. As Coinbase processes more trade volume than any other US platform, token listings are widely considered a liquidity event for early backers.
Sure enough, the price of Al-Naji’s DESO token halved shortly after its Coinbase-listing peak, as the project once again failed to attract enough buyers to justify its inflated price.
Coinbase promises venture wing doesn’t dictate listings
Andreessen Horowitz, one of Coinbase’s earliest investors, still holds a seat on the exchange’s board. The firm has also backed at least 12 projects that subsequently found their way onto Coinbase, noted FT.
As for why tokens listed on Coinbase performed so poorly despite an initial pump, independent crypto analyst Faisal Khan offered (via FT):
“I think that raises a lot of questions about if insiders are dumping on retail investors, as well as conflicts of interest between VCs and exchanges, who work together with zero oversight.”
Those concerns were echoed by Harvard Business School’s Marco Di Maggio, who flagged Coinbase’s poor disclosure practices for not mitigating conflicts of interests.
“Since the crypto community is not particularly open to these types of things, I would have expected them to be very careful about this,” said Di Maggio.
For what it’s worth, Coinbase told reporters that it does have policies to mitigate conflicts of interests, and that it doesn’t make listing decisions in cahoots with outside investors or its own board.
The Delaware-headquartered company maintained that Coinbase Ventures has no influence over the cryptocurrencies and other digital assets it offers.
Coinbase published a blog post promising to make its holdings “even more transparent” in response to FT. It also added seven missing tokens to its investment disclosure page.
As for Al-Naji’s DESO token, it’s now down 65% since its Coinbase-inspired local peak.
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