Coinbase and the GYEN and POWR incident: what happened
Coinbase and the GYEN and POWR incident: what happened
Security

Coinbase and the GYEN and POWR incident: what happened

By Eleonora Spagnolo - 18 Jan 2022

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Coinbase has experienced an incident involving users who traded with GYEN and POWR, and were credited with either 100 times their purchase, or just a penny of the amount purchased. 

The controversy

There has been a lot of controversy on social media about how the exchange has handled this episode. Many users speak of fraud and theft of which they have been victims. Because in the case of Gyen, the incident took place immediately after the listing, when demand increased and the value increased abruptly.

On its blog, Coinbase clarified the incident point by point.

Coinbase’s incident with GYEN and POWR

First of all, the incident happened on November 19 at 4 PM EST following an update that went wrong and resulted in the incorrect amount of the cryptocurrency purchased being credited. As soon as Coinbase became aware that it was crediting a penny or a hundred times as much as the purchase, it stopped trading immediately. 

At 5:35 AM EST, so after an hour and a half, Coinbase disabled trading of GYEN and POWR. 

At 7:26 AM EST., it blocked the accounts that had received the erroneous purchases. 

On 21 November, almost all of these accounts were rehabilitated to trading again, and on 13 December, trading of GYEN and POWR on Coinbase resumed again.

Coinbase, however, had to remedy the erroneous transactions, particularly with those who had received 100 times the amount purchased. This is because in the meantime those amounts have either been converted into Bitcoin or have been transferred to an external wallet. 

To bring things back up to speed, Coinbase withdrew funds directly from the accounts involved, first drawing from the balance of fiat currencies, then into USDC and other stablecoins, and finally moving to cryptocurrencies by descending capitalization. Those who had already moved their balances out of Coinbase and had not left enough money to take back what they had mistakenly paid in were contacted and cooperated with Coinbase. 

The amount owed was determined by quantifying it in US dollars at the lowest exchange price of GYEN and POWR at the time of the incident, in order to ensure that users would not be overcharged.

Those who were given less funds than they purchased received the equivalent in Bitcoin of the highest exchange rate on the day of the incident. 

In addition, all restricted accounts were credited $100 in Bitcoin

Coinbase accident
Coinbase had to block accounts that had traded with GYEN and POWR.

The price problem with GYEN

What infuriated the users involved is that the moment the accounts were restricted, the price fluctuated. Coinbase explained the incident as follows:

“We have seen customers speculate on social media that this incident was somehow related to this break in parity. We have also seen customers speculate that this break in parity was somehow caused by Coinbase. These allegations are false and reflect a misunderstanding about what GYEN is and how Coinbase works”.

Coinbase pointed out that GYEN’s parity break actually occurred on November 17 when it had reached a value of 7.48 yen, while on the day of the incident it had already collapsed to less than 1 yen. 

Coinbase adds that GYEN’s parity break occurred due to the fact that when GYEN was listed on Coinbase, demand increased but with little supply available, this led to a price increase. Coinbase warned users that unusual activity was taking place on GYEN:

Therefore, Coinbase concludes:

“The break in parity occurred because of these market conditions specific to the GYEN digital asset unrelated to Coinbase operations”.

On social networks, some users do not seem to think so, but then again, it is the terms of agreement that each user accepts when signing up that count. It is precisely those postulates that few people read that have been applied, whether they like it or not. This is the strength (and to some extent the weakness) of centralized exchanges. 

Previous incidents

This is not the first time that Coinbase has experienced incidents. Some time ago, some users complained that their accounts had been hacked. This was not the responsibility of Coinbase, it was a matter of people being affected by SIM swapping. 

Subsequently, there was a phishing attack that saw hackers emptying the accounts of some users, which Coinbase compensated. 

The case of GYEN and POWR is different, but in each case sees Coinbase’s support under scrutiny. 

 

Eleonora Spagnolo

Journalist passionate about the web and the digital world. She graduated with honours in Multimedia Publishing at the University La Sapienza in Rome and completed a master's degree in Web and Social Media Marketing.

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