Coinbase faces criticism over acquisition of Neutrino; releases official statement to defend its accretion

Coinbase, one of the largest cryptocurrency exchanges has recently been on the fiery end of a debate over its recent controversial acquisition of Neutrino, a startup which focused on blockchain analysis and used public blockchain data to trace cryptocurrency transactions.

Neutrino, an Italy-based company was founded in 2016 and is led by Giancarlo Russo, Marco Valleri and Alberto Ornaghi.

The controversy is taking place because of the involvement of Valleri and Ornaghi. Before the establishment of Neutrino, CRO Marco Valleri and CTO Alberto Ornaghi were executives of an intelligence firm, Hacking Team, which sold spyware tools to government agencies across the globe.

Hacking Team also traded the tools to repressive regimes, allegedly violating international controls on the use of such tools. Those regimes were, in turn, used to monitor and endanger journalists, activists, and political dissidents.

The takeover of Neutrino has flooded Twitter with its history, and various market participants have criticized the exchange for getting involved with the startup. Matteo Leibowitz, a crypto analyst for The Block, questioned Hacking Team’s history of facilitating human rights abuses, which is completely contradictory to Coinbase’s claims of maintaining a democratizing cryptocurrency exchange.

Kyle Torpey, a full-time crypto-writer, recently sent Coinbase a set of questions regarding their acquisition of the analytics firm Neutrino. According to Torpey, the exchange did not answer any question, but only released an official statement.

The statement said:

“We are aware that Neutrino’s co-founders previously worked at Hacking Team, which we reviewed as part of our security, technical, and hiring diligence. Coinbase does not condone nor will it defend the actions of Hacking Team. Increasingly, third-party blockchain analysis companies are requesting customer data from cryptocurrency companies that they serve.”

The statement further added:

“It was important for Coinbase to bring this function in-house to fully control and protect our customers’ data and Neutrino’s technology was the best we encountered in the space to achieve this goal.”

The statement has not convinced many cryptocurrency influencers. Some influencers have also urged users to withdraw their digital assets from Coinbase and use alternative exchanges, including Gemini or Bitstamp.

The history of Hacking Team’s work with government-affiliated sectors to use spyware tools and target journalists and protestors have earned the startup the label of a certified “Enemy of the Internet”. According to Reporters Without Borders, the software designed by Hacking Team has been used by governments “to capture the passwords of journalists and netizens” and “to commit violations of human rights and freedom of information”.