Its not ridiculous at all.

With that much spread and at prices as high and fluctuating as much as they currently are you cannot expect to take 10 DAYS for a transaction of this nature.

Honestly, looking at this from the outside what is the difference between this an actual larceny? A large purchase comes in while the commodity is priced high, the commodity is not purchased but instead funds are held on to while the price drops and then the bitcoins are purchased at the lower price and the company pockets the difference...

Not even saying that foul play truly happened, but instead saying you cant run a business whos actions LOOK indistinguishable from foul play and expect to stay in business...

If you're in a business where you can tell customers i lost 30% of the value of your transaction due to a mistake on our end its eventually going to turn into a scam, even if that wasn't the initial intention... its just too much temptation

Umm, if the Bitcoins were purchased at a lower price that would be good for the buyer. It's "Buy low, sell high", remember? The problem, it seems, is that the price was locked in at the original, higher, order price, but the transaction didn't go through and so the buyer had no liquidity as the price continued to drop. Had the transaction gone through the buyer would've lost an equal amount of money (and so the accusations of outright theft or fraud are a bit over-the-top), but the big problem is they were prevented from taking corrective action to limit their loss, which I'd consider to be pretty shitty service for a financial institution.

What he meant was coinbase could have easily used some of the 35k to buy the 40 by cheaper, and keep the rest. They could have done this, and still said what they said and the net effect to the customer would be the same.

This is not good for coinbase, even if it was an accident.

Is there any evidence that Coinbase actually did that? My read of the Coinbase founder's post up-thread was that they purchased the Bitcoins on the user's behalf at the time he entered the order, but a server failure prevented them from being transferred to the buyer's wallet. If they had given him the current market price they would have to purchase additional Bitcoins and eat the cost. (Which, reading the recent edit, seems to be exactly what they're doing.)

I agree this is not good for Coinbase, but I am also far less surprised or indignant than many posters here seem to be. This is what the early stages of most markets look like, with fuck-ups and manipulation galore. Read a book on the history of the NYSE (and later, Amex, which was called the "Over the curb" market because it consisted literally of people shouting orders at each other on a street corner in NYC) - this is far milder than the stuff that went on then. At least Coinbase seems to be exhibiting incompetence rather than the naked greed and malice that characterizes many other nascent markets.

You seem to have missed this part: purchased at the lower price and the company pockets the difference

I am not invested in bitcoin, so this may be a naive question, but is there any explicit promise that your funds will be available within n-time? There appears to be a gap in expectations. These entities do not seem to be brokerages, although many people expect them to be so.

That's not a bitcoin question, that's a per-exchange question.

If an exchange gives users an SLA stating "orders will be fulfilled within X business hours" then that's a contract between two parties. If the exchange says "yeah, we'll get around to it someday and you agree to deal with that" which is the usual intent language in the small print then you don't have much to go on if there is a delay, other than trying to raise a public outcry in the hopes they will back down.

Understood, but my question was specific to the current entities (exchanges/whatever) in the market that let you purchase bitcoin.

This is definitely ridiculous. The loss of value was not on the fault of Coinbase, but the result of market swings.

but he wasn't able to react to market swings for 5+ days after he was supposed to receive delivery

If you delay orders due to your fault (no matter if it's liquidity, intentional, technical or whatever) then you're liable for the market swings of the delayed good.

Sure, but the question is: if Coinbase placed the order today, that suggests they kept the ~12k loss for themselves. Is that rightful profit?

Actually NO from an independent point of view they JAMMED him. Trades and transactions have a SETTLEMENT day and date in the financial markets. If a trade is not settled, i.e deposited and the funds available by the said settlement date the trade is called a FAILED trade. Both parties return at original transaction or go to arbitration. This alone is a reason not to touch coinbase. The system is too immature and new and I would learn from this and not play around with sums of 35K on underdeveloped platforms.

edit:grammer

Yes. The question is why did they refuse to act until this public outcry.

My theory? Proprietary trading. The CoinBase guys were probably trading on behalf of the company and screwed up royally, taking a big hit, so they decided to try and pass that loss onto customers or until they balanced the books

A very good guess either that or front running. This is what market makers used to do back in the day, aka "front running". Its banned in the financial markets because there is regulation and thus illegal. Either that or like you say they took a massive hit and basically held a ton of orders to mitigate the damage.

And if Coinbase doesn't fall under those financial regulations, that is fraud.

Considering the loss of position over the last week, it's certainly feasible.

Here's the thing about financial institutions: when they make a mistake, they pay for it. They should really be crediting him 62.9 BTC, which is approximately what he would have gotten by selling on December 13 and buying again today.

No, the trade should have been failed. We can't just assume he would have sold opportunistically; that's insane.

Agreed, this is a failed trade.

They should simply wire back the money to end this matter and blame a back-end gremlin.

As a gesture of goodwill, maybe comp the guy $100 credit, cash, starbucks gift cards, whatever.

They've actually made it worse now by executing the trade but only after a public outcry.

That's true for traditional financial institutions that consider this the costs of doing business and can easily absorb such losses. Something like the $25mn Coinbase got in venture capital is lunch money for a JP Morgan or Goldman Sachs. BTC on the other hand has insane amount of volatility and the players are comparatively small. You may simply find yourself in a situation were they are simply unable to refund your losses and instead declare bankruptcy.

Well that's the point - if you take a short/long position in BTC, then you must afford to pay it out even in fluctuations - if you can't, pay someone to hedge/'insure' it; if you don't - declare bankruptcy and pay up whatever you have.

The whole point is that 'comparatively small' players shouldn't be allowed to take up insane amounts of volatility; if you accept consumer's money then it would be reasonable to require to put that $25mm as a bond to pay out your debts, and put a ceiling on how much deal volume you're allowed to hold if you've got only tiny amounts such as $25mm.

Do you work for coinbase? You seem to be defending them pretty hard.

No, I don't work for Coinbase.

I'm an avid user and big fan. I've tried a lot of alternative products, and none compares to Coinbase in terms of reliability and overall experience.

Sure, they screwed up. Brian owned up to that and fixed the issue quickly.

I just think some of the anger at the market swing is being wrongly directed at Coinbase.

"I just think some of the anger at the market swing is being wrongly directed at Coinbase."

You keep mentioning market swing. Market swing is relevant if OP had the bitcoins in his control which clearly was not. So while the market swung, he lost money not because he was sitting on his ass but because he could not do anything about it to minimize a loss. See the difference ?

I understand the difference, but I still think some of the anger at the change in price is being misdirected.

Fixed issue quickly?? Let's do an experiment -- I setup a page somewhere online and you transfer $35,000 of your own dollars. Then you wait 5 days for me to transfer them back (maybe). Will see how your stomach will handle that...

You clearly have some agenda for saying things you say. Noone is that stupid.

They haven't fixed the core issue at all. What they have done is admitted the situation is entirely their fault (and Brian deserves credit for showing up here so quickly). Hopefully an appropriate remedy will be forthcoming.

Fair point. And agreed, hopefully they will address it further.

Again, not saying that this is not a major screw up.

I just think Brian and crew deserve more support than they are getting.

Agreed regarding Brian and the company. I doubt a mainstream institution would be so willing to engage directly like this.

Reliability and overall experience would have been amazing if it was done on the 13 and he did not need to go public to get it fixed.