Coinbase has announced that it will layoff members of the recently acquired Neutrino team who have a history of being affiliated with spyware projects. The announcement comes as the San Francisco-based exchange giant continues to be in the eye of a social media storm with many users deleting their accounts. Meanwhile, allegations have also emerged stating the existence of a user data leak by one of the company’s technology provider.
Coinbase Fires Neutrino Employees
Brian Armstrong, the CEO of Coinbase announced the decision in a blog post published on the company’s Medium account of Tuesday (March 5, 2019). According to the post, the Coinbase has decided to fire members of the Neutrino team who have a history of working on spyware projects.
An excerpt from the announcement reads:
“We took some time to dig further into this over the past week, and together with the Neutrino team have come to an agreement: those who previously worked at Hacking Team (despite the fact that they have no current affiliation with Hacking Team), will transition out of Coinbase.”
By Armstrong’s own admission, the company didn’t follow proper due diligence before going ahead with the Neutrino acquisition. However, Armstrong says the company realizes its failure to make the proper tradeoff between being in compliance with regulatory provisions and protecting the civil liberties of its customers.
The statement from Armstrong comes amid a strong wave of criticism and backlash concerning the company’s Neutrino acquisition. The primary reason for the negative reaction came from the revelation that certain members of the Neutrino team had previously worked for a group called “Hacking Team.”
According to reports, Hacking Team worked on numerous state-sponsored spyware programs for at least 22 different countries. Critics were quick to state their objections to the acquisition alleging that it held severe consequences for the safety of Coinbase user data.
In response, some users deleted their Coinbase accounts with the hashtag #DeleteCoinbase trending all over ‘crypto-Twitter’ over the past couple of days. Such was the popularity of the movement that several commentators offered solutions to whatever issues users were facing while trying to delete their accounts.
At some point, users began to complain of being unable to delete their accounts. Thus, began useful suggestions like the #DeleteCoinbaseTrustChain; a spoof of the Bitcoin Lightning Network chain and sending leftover funds to countries like Iran.
Revelations of Data Breach
In its defense, Coinbase did initially say that it was aware of the links between Neutrino and Hacking Team. However, the company said Neutrino’s technology was too good to ignore. Armstrong also alluded to that point in the statement release, saying:
“Until recently, we worked with several outside vendors that provide blockchain analytics, as most exchanges do. However, they didn’t support all the assets we wanted to have on our platform, so we knew at some point that we would need to bring this capability in house. We examined the players, found that Neutrino had some of the best technology in this area, and decided to acquire them.”
I asked our Compliance team what they thought of Neutrino. Fortunately, they'd just completed an evaluation. Neutrino came in last place on product (out of the 5) but was disqualified anyway due to the risks. However, other factors are important in M&A: cost, culture fit. pic.twitter.com/kiYh11GEBc
— Jesse Powell (@jespow) March 3, 2019
Meanwhile, amid the saga, Jesse Powell, the CEO of Kraken revealed that Neutrino came in last place during its in-house evaluation of blockchain analytics firms.
Also, a senior executive at Coinbase revealed that the company needed to partner with a robust technology provider given that it had suffered a breach of user data. In response, Elliptic, a London-based blockchain analytics company and a technology provider to Coinbase issued a statement denying that it sold user data of the exchange’s customers.