Coinbase Calls Out Justin Sun in Explaining Why It Booted wBTC

Coinbase, the largest U.S. cryptocurrency exchange by volume, flat out said in a court document filed yesterday that it delisted the wBTC token because of issuer BiT Global’s relationship with Tron founder Justin Sun.

In response to a lawsuit over its November delisting of wBTC, the top wrapped bitcoin product on the Ethereum blockchain, Coinbase said in the very first sentence that it acted “due to the unacceptable risk that control of wBTC would fall into the hands of Justin Sun.”

On Dec. 18, the judge hearing the case refused to issue a temporary restraining order barring Coinbase from delisting wBTC while the case goes forward.

While Sun’s involvement was widely assumed to be the reason for the delisting, Coinbase had not admitted as much until now.

Citing the loss of market share and damage to wBTC’s reputation, BiT Global sued Coinbase for $1 billion on Dec. 13, arguing that the delisting was a monopolistic attempt to favour the exchange’s own newly released, Bitcoin-backed token cbBTC.

Coinbase, for its part, cited the U.S. Securities and Exchange Commission’s March 22, 2023 lawsuit charging Sun, the founder of Tron, and three of his companies with fraud and securities law violations over wash trading allegations. He was also accused of getting celebrities like Ne-Yo and Jake Paul to “illegally tout” Tron’s TRX and BitTorrent’s BTT without disclosing that they were paid.

Sun’s relationship with BiT is somewhat unclear, but a partnership announcement in August between BitGo, the original custodian of wBTC’s backing assets and Sun-affiliated BiT Global to share custody was the deciding factor for Coinbase. It added that BiT Global refused to answer questions about Sun’s involvement during the Coinbase review process.

Free to act

Citing Sun’s “material involvement” in BiT, Coinbase said, “BiT now asks the Court to override, on an emergency basis no less, Coinbase’s judgment that continuing to list wBTC could compromise the integrity of its platform and put customers at risk.”

Disputing BiT’s claim of $1 billion in damages, Coinbase noted that less than 1% of transactions involving wBTC take place on its exchange.

Pointing to its own listing standards, the exchange also noted that nothing “compels Coinbase to host an asset on its exchange that is now connected to an individual with a long history of alleged fraud and market manipulation.”

Coinbase is not alone in its removal of wBTC. In August, MakerDAO (since renamed Sky) booted wBTC because of its ties to Sun. Sun was involved in stablecoin-related controversy in January, when True USD depegged after Sun minted 25% of the TUSD supply.

‘Guilt by association’

Some prominent members of the blockchain community were not satisfied with Coinbase’s explanation.

While saying he believes Sun is “a grifter,” an X user who goes by the name of Pledditor commented that “basically just they don't like Justin Sun. That's really just it. They don't give any technical or legal arguments about why wBTC can't be listed. It's just guilt by association.”

Gabor Gurbacs, an advisor to top stablecoin Tether and formerly to Bitcoin ETF manager VanEcks, replied that Coinbase’s treatment of Sun is “ironic” given that “Coinbase itself is under SEC and numerous other investigations, probably many more than Justin and his businesses.”