Pausing email updates during crypto crash could land Coinbase in hot water
US-based crypto exchange Coinbase is under fire for apparently pausing its email price notifications just when currencies across the board began hemorrhaging value earlier this year.
According to experts quoted in an article by Mother Jones, the decision “likely contributed to losses for retail crypto investors who may otherwise have sold their holdings ahead of further devaluation.”
There are even suggestions that the move by Coinbase could contravene federal or state consumer protection laws.
“It’s potentially illegal,” said Matthew Bruckner an associate professor at Howard University (via Mother Jones). Bruckner says that Coinbase’s behavior could land it in hot water regarding Unfair and Deceptive Practice (UDAP) laws.
“It could be unfair to do this, to sort of induce people to rely on the email alerts,” said Bruckner, adding that if Coinbase failed to notify users and its actions “caused substantial injury,” it could be a problem.
Bruckner also believes that users may have grounds to sue the San-Francisco headquartered firm, particularly if it led them to believe the emails would continue and, as such, they stopped checking crypto prices elsewhere.
Read more: Coinbase likens poor performance to cyclical nature of crypto
Coinbase says that while it did test email notifications earlier this year, this was only on an unspecified subset of users.
“We began testing email notifications for some users in January, and have since rolled out email notifications for all interested users,” a spokesperson said.
The company said it paused the test in February, months before markets started to plummet, and it appears that alerts were back up and running for all users in June.
However, a user contacted by Mother Jones says he didn’t receive any notification that the emails were being paused, nor did Coinbase make users aware via its blog.
Some traders may have liquidated before the crash if only they’d received email updates
Some experts also warn that Coinbase could find itself the subject of legal action from users who may have sold up earlier than they did if only Coinbase had alerted them to impending price drops.
Benjamin Edwards, associate professor of law at the University of Las Vegas, told Mother Jones:
“It would not surprise me to see arguments that Coinbase’s failure to notify customers that it would arbitrarily pause providing price alerts during a market decline constitutes a material omission.”
“Some of those customers might have closed their positions earlier if Coinbase had alerted them,” (our emphasis).
He also suggested that if a traditional brokerage firm had done this, the Financial Industry Regulatory Authority (FINRA) would likely have stepped in.
Read more: Lawsuit claims Coinbase left basic security holes to sell fixes at a premium
In response to criticism around its email notifications, Coinbase told Mother Jones via email that, “All Coinbase customers have the option to be notified about certain changes to asset prices on their watchlist through push and in-app notifications.”
She also pointed out that even in the absence of email notifications, users would still receive in-app push notifications if they opted in.
For more informed news, follow us on Twitter and Google News or listen to our investigative podcast Innovated: Blockchain City.