Wednesday, August 25, 2021
As the saying goes, where there’s smoke, there’s fire!
Well, investors and users of Coinbase Global (COIN), the world’s largest crypto-currency exchange, are learning that lesson the hard way.
Yesterday, an investigative report published by CNBC “found thousands of customer complaints against the company.”
What were the complaints about? Simple. Their accounts were hacked and cleaned out, and then they received zero help from customer service.
Sound eerily familiar? It should — because 40 days ago, I put you on high-alert about the exact same issues.
While CNBC identified victims whose losses topped $150k, I shared the harrowing account of a father in California who watched cybercriminals complete 110 transfers out of his account (in just 13 minutes) for a total theft of over $700,000.
But I’m not here to tell you “I told you so.” Or that the losses for the victim I identified are bigger or more shocking.
Instead, I’m writing about this again because the CNBC report unearthed several important revelations…
And these revelations have convinced me, more than ever, that it’s only a matter of time before Coinbase’s inadequate cybersecurity protections — and its complete lack of regard for its customers — will ultimately sink its stock.
Why Deny When You Can Just Stay Silent?
All companies, big and small, face customer complaints.
So it’s not just that Coinbase has received more than 11,000 FTC complaints and 1,128 BBB complaints (and counting) that has me so concerned.
What has me so concerned is the company’s response to these complaints:
In a word, crickets!
The BBB sent a letter to Coinbase to address the complaints.
Per CNBC, the organization has “not heard a response from this business, about the situation, pattern of complaints for the last three years,” said Alma Galvan, a marketing and communication manager with the BBB.
And if that’s not bad enough, the company’s management team is hiding behind their keyboards and employees. They repeatedly denied on-air interview requests with CNBC in the wake of the report.
All they could muster up was an email excuse, not from the CEO, but an underling tasked with attempting the greatest spin-job in public company history:
“Over the years, we’ve consistently updated our customer support offerings to help us scale. In early 2020, we moved to email as our primary channel of support. Many of our customer inquiries require our agents to conduct a significant amount of research to resolve the issue. And, to avoid long wait times, communicating asynchronously via email was the preferred method. “
So if email-only communication was supposed to improve customer wait times, riddle me this, Batman: why is the gentleman who lost $700,000 still waiting for a human response after 54 days?
All he’s received are automated emails, including the most recent one that said it would be another 20 business days before he hears anything else.
As for the customers interviewed by CNBC, many of them were blamed for their own hacks. Not exactly the response they were expecting — and not exactly the way to show you’re taking any of this seriously, Coinbase.
Forget the maxim that the customer is always right. For Coinbase, the company line appears to be that the customer is always wrong.
I mean, if you just tell them they’re wrong and then move on to the next complaint, you should be able to improve response times, right?
Online Talk is Cheap
To be fair, the company hasn’t been completely silent.
In a blog post in January, management admitted that customers are experiencing delays in response times and promised to do better.
Then on the most recent earnings call, the CEO boasted:
“So proud to report that we are doing much better [with customer service], but there’s always more to do. We’ve increased the headcount five times or so since January, beginning of this year, working on support specifically.”
Unfortunately the recent customer experiences reveal that all that talk is cheap. Nothing has meaningfully changed.
My guess is that the lack of customer service — and even more frightening, the lack of adequate security to protect customer accounts — is far worse than we can imagine.
And this isn’t a situation where the company doesn’t have the resources...
At a nearly $70 billion market cap with over 2,100 employees, Coinbase has what it takes to make changes quickly.
And yet, it still doesn't have a single customer-service phone line?
That doesn’t cut it for banks, brokerages, insurance companies, or any other company involved with handling our hard-earned capital. And it can’t cut it for Coinbase.
Until it corrects its customer service issue, I wouldn’t consider putting a single penny into a Coinbase account or the company’s stock.
And even then, I’d proceed with caution.
Why? Because as I write this, the stock market’s equivalent of ambulance-chasing lawyers are on the scene.
While they’re typically a nuisance, in this case, I believe they’ll be a catalyst to unearth the reality of the situation inside Coinbase.
When the magnitude of the customer neglect comes to light, it’s only a matter of time before shares start unraveling.
Not to mention, even if Coinbase does fire up a 1,000-person call center in a blink, that would only address half the problem. The other half involves adequate security.
As Etay Maor, Senior Director of Security Strategy for cybersecurity company Cato Networks told CNBC, “These exchanges have to invest heavily, invest in security if they want to take it seriously, just like the banks have done and have learned the hard way.”
Based upon the number of customer accounts that have been hacked, it’s clear that the company is way behind the curve here, too.
Bottom line: Look for more shocking details to surface about this crypto darling’s inadequate operations — which in turn should start a sharp downturn for shares.
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