Coinbase delisted wBTC “due to the unacceptable risk” that the top bitcoin stand-in on Ethereum “would fall into the hands of Justin Sun,” the exchange said Tuesday in response to a lawsuit over its decision.
Market observers had previously read between the lines of Coinbase’s November nixing of wBTC. At the time, the exchange cited its listing standards as the reason for the move without elaborating. Last week, wBTC’s issuer BiT Global filed a wide-ranging suit accusing Coinbase of improperly favoring its competing asset, cbBTC.
But in a 25-page response, Coinbase said the decision had everything to do with Justin Sun, the crypto billionaire and founder of the Tron blockchain, who is also accused of fraud and market manipulation in the United States. Sun became associated with wBTC via a partnership announced in August, according to Coinbase’s filing.
“Coinbase—like many others in the industry—had serious questions about whether BiT could be a reliable steward given Mr. Sun’s involvement,” the exchange said.
Coinbase initiated a review of wBTC after the partnership’s unveiling. It asked BiT questions about its ownership and Sun’s suspected involvement, but the firm “refused” to answer them, Coinbase’s filing said.
“At the conclusion of its diligence, Coinbase concluded that Mr. Sun’s affiliation with—and potential control over—wBTC presented an unacceptable risk to its customers and the integrity of its exchange,” the filing said.
Whether Sun has any involvement with BiT remains unclear. Lawyers for BiT Global did not immediately return a request for comment. Neither did representatives of Tron.
But the mere appearance of a connection was enough to spook Coinbase into cutting ties, it said.
“No law supports BiT’s claims—and certainly none 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,” the filing said.