Coinbase faces backlash for linking wBTC delisting to Justin Sun controversy

The cryptocurrency community has reacted strongly against Coinbase’s explanation for delisting Wrapped Bitcoin (WBTC), which the exchange linked to the "unacceptable risk" associated with Tron founder Justin Sun. On December 17, Coinbase filed a response to a lawsuit brought by BiT Global, an affiliate of Sun, which accused Coinbase of harming the wrapped Bitcoin market by delisting WBTC in November.

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Coinbase’s Explanation Falls Short

In its filing, Coinbase cited risks tied to Sun, including accusations of financial misconduct and regulatory investigations. However, many within the crypto community have criticized Coinbase for failing to provide adequate legal or technical justification for the delisting decision. Some have also highlighted that Coinbase itself has been under numerous investigations.

Guilt by Association

Bitcoin enthusiast and Coinbase skeptic Pledditor took to X on December 17 to criticize the exchange for what they described as a lack of substantive arguments in the delisting decision. "It’s basically just they don’t like Justin Sun," Pledditor stated, adding that it’s "just guilt by association." Pledditor criticized Coinbase for not providing legal and technical reasoning for delisting WBTC.

Justin Sun’s Troubled History

The Coinbase filing referenced Sun’s involvement in alleged misconduct, stating that he has "reportedly violated industry and government standards intended to prevent fraud." The exchange expressed doubts about BiT Global’s reliability due to its association with Sun. "So too is any acknowledgement that he has repeatedly been accused of, investigated for, and sued for financial misconduct, and that reports of his alleged misdeeds abound in the press and crypto community more broadly," Coinbase added.

Sun, the founder of the Tron (TRX) cryptocurrency, was hit with fraud and securities violation charges by the United States Securities and Exchange Commission (SEC) in March 2023. He has also reportedly been the subject of an investigation by the US Federal Bureau of Investigation and the prosecutor’s office for the Southern District of New York.

Coinbase’s Own Troubles

Some prominent community members, such as VanEck adviser Gabor Gurbacs, have drawn attention to Coinbase’s legal troubles in the US in the context of the wBTC case. "It’s ironic that Coinbase is treating Justin Tron this way," Gurbacs wrote in an X post reposted by Sun. "Coinbase itself is under SEC and numerous other investigations, probably many more than Justin and his businesses." He added, "Questioning someone’s reputation this way might just bring out skeletons from their own closet."

SEC vs. Coinbase

The US SEC sued Coinbase in June 2023 for the alleged offering of unregistered securities. The litigation is ongoing, with Coinbase’s chief legal officer, Paul Grewal, having publicly urged regulators to adopt a more constructive approach toward the crypto industry.

In January 2023, Coinbase reached a $100-million settlement with the New York Department of Financial Services over a case involving its compliance program. This move has sparked further criticism from within the community, with some questioning whether Coinbase’s actions are truly driven by concerns for user safety or if they are simply an attempt to deflect attention from their own troubles.

The Fallout

The cryptocurrency community is not taking Coinbase’s explanation lying down. Many have expressed outrage and disappointment on social media platforms, citing a lack of transparency and accountability from the exchange.

As the debate rages on, it remains to be seen whether Coinbase will provide further justification for its delisting decision or if the exchange will continue to face scrutiny from within the crypto community. One thing is clear: the controversy surrounding WBTC’s delisting has shed light on some very real concerns about accountability and transparency in the cryptocurrency space.