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Coinbase Accused of Tracking Bitcoin Users, Notifying Cops of Transactions

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Coinbase Accused of Tracking Bitcoin Users, Notifying Cops of Transactions

It’s a web of mistrust, accusations and outrage. It all started earlier this year when the Department of Homeland Security send Reddit a subpoena for the identities of some members of the DarkNetMarkets subreddit, an online community where users share information and discuss various online markets located on the “dark net,” which is an euphemism used to describe services, sites and machines using anonymizing protocols such as TOR.

This is the current relationship between members of the DarkNetMarkets subreddit and the Bitcoin wallet hosting service, Coinbase.

On May 2nd, a Coinbase customer posted an ominous warning on Reddit, accompanied by screenshots, demonstrating that Coinbase is actively monitoring customer transactions. This particular user claims to have made a donation to Gwern Branwen, who is a researcher and the moderator of the DarkNetMarkets subreddit.

The complain went on to state:

“When I donated to gwern, I hadn’t made any other transactions with Coinbase for two weeks or more. The only transaction in Coinbase for the last two weeks until right now is the gwern donation. It’s no coincidence.”

A second user followed with a post a day later stating,

“Last friday a user posted that after donating to one of Gwern’s wallets coinbase sent him an email shortly after confirmed. Me being an inquisitive person and supporter of /u/gwern decided to give the theory a go and donated 5 dollars to the account. Well pics or it didn’t happen right? Proof:

Then, after another day, a third user wrote about an even a worse experience; he claims in his post that he made a payment to a dark net market from his Coinbase account and local cops showed up at his house in an attempt to interview him about onine activities:

“I wasn’t home yet from work, but my wife tells me local LE showed up and wanted to have a “chat”. Asked if I or anone had ever ordered anything illicit in the mail. Said “nobody’s in trouble, we’re just following up on something that might be nothing””

Many more Reddit users have been railing against Coinbase and speculating about the reasons behind what appears to be clear monitoring of transactions, especially to wallet addresses associated with dark net markets or researchers, activists or dissidents.

A Coinbase spokesperson e-mailed a comment to The Daily Dot and said, “We don’t comment on specific cases, however, Coinbase is required to monitor activity on its platform in accordance with the Bank Secrecy Act and other regulation governing all Money Service Businesses.”

It was unclear how donations made to specific users constitute a violation of the Bank Secrecy Act.

Until Coinbase explains their monitoring activities in more detail, my recommendation would be to either stay away from their services or practice more caution when using them to make donations to people like Gwern Branwen, Edward Snowden or Ross Ulbricht.

Also, do not send Bitcoin to questionable address directly from your Coinbase account as Coinbase has a physical address for all their customers; if you do need to make anonymous donations or payments to certain individuals, withdraw all your Bitcoin from Coinbase and then make use of a Bitcoin mixing service like

Bitcoin is a revolutionary technology which can facilitate anonymous and safe transactions, but it is not anonymous by default. Learn about it and use it correctly before assuming anonymity.

Virgil Vaduva is a Libertarian security professional, journalist, photographer and overall liberty freak. He spent most of his life in Communist Romania and participated in the 1989 street protests which led to the collapse of the Ceausescu regime. He can be reached at vvaduva at