Bitcoin boom puts crushing demand on local firm
Vancouver-based Einstein Exchange has been overwhelmed by bitcoin boom
A Vancouver company is facing angry and panicked complaints from investors who fear it has mismanaged their trade in bitcoin or other cryptocurrencies.
Einstein Exchange has seen scores of complaints, threats of legal action, calls for police intervention and even allegations of fraud in recent weeks related to claims of vanished purchases, unmet requests to cash out or move coins, and unresponsive customer support.
Michael Gokturk, the director of Einstein Exchange, said he felt “heartbroken” to hear customer complaints that were put to him during a lengthy interview Wednesday and explained the company never anticipated the massive interest that has left it backlogged.
“They have a right to be upset, whether it’s a $1 customer or a $10-million customer. When you’re dealing with people’s money, they’re absolutely right. We just can’t get to them fast enough,” Gokturk said.
When prices for bitcoin and other virtual currencies spiked in recent weeks, currency exchanges were slammed with applications for trading accounts. Waits for online account verification — a cumbersome and preliminary step required by most exchanges — grew from days to weeks in some cases.
But Einstein Exchange was different. It claimed waiting times of less than 60 seconds for cryptocurrency purchases by Visa, MasterCard, American Express or bank draft, according to its website, and “instant sign-up and verification for Canadians,” according to its ad on Google. In five months, the exchange — while still in beta form — grew from zero customers to about 30,000, by Gokturk’s count.
What those customers experienced depends on who you ask. Tyler Jackson, from Lexington, Ky., put his experience plainly.
“This company is shady and doesn’t seem to care about their customers,” Jackson wrote in a recent email. “There seems to be no hope in getting my money back.”
Jackson’s story begins on Christmas Day, when he received $200 as a gift. He decided to spend it on bitcoin, which he said he bought through Einstein Exchange.
Later, when he tried to pull out his funds, he got a message that he needed to be verified first. He sent the company copies of his bank statement and driver’s licence, and a selfie of him holding that licence. He said he is still waiting.
Terrence Brannon, reached last week at a Motel 6 in Asheville, N.C., said he signed up, then clicked to buy US$200 in bitcoin with his credit card on Dec. 10.
Unable to withdraw his money, move it to a different exchange, reach the company or even log into his account, he filed a dispute through his credit card company. He too is still waiting for resolution, he said.
The men’s stories mimic several told to Postmedia by people from around North America who had invested sums ranging from $200 to US$15,000 through the company. Many of those interviewed would not agree to go on the record out of concern it would damage their professional or personal relationships. One, a Nova Scotia investment adviser, said he had “likely kissed (his) money goodbye.”
The stories also resemble dozens of complaints found online, including those on a Reddit forum moderated by employees of Einstein Exchange. “SCAM,” “Screwed out of $1,350,” “Bad service,” and “Fraud: Report to B.C. Securities Commission” were the headlines of just a sample of negative posts about the company.
“Suing Einstein Exchange for losses and negligence,” read another, which appeared to be seeking people to join a class action.
Gokturk said about 55 per cent of the complaints the company has received relate to its verification process, which is performed manually by staff who work on the top floor of a downtown office building. It is a tight, warm work space packed with computers, monitors, tickers and 14 employees who perform various functions.
Gokturk said it takes one person one hour to approve 30 verifications, and the company recently stopped taking on new customers to handle its backlog.
“We are pro rules and governance. We are pro transparency,” he said, adding that the company wanted to work with regulators to “help write the rules” and put policies in place to protect customers.
Alison Walker, a spokeswoman for the BCSC, said depending on the operations or location of a particular cryptocurrency marketplace, it may not fall within its regulatory jurisdiction.
“Complaints about exchanges can be directed to the BCSC. If the BCSC is not the appropriate agency, we can direct the complaint to other organizations accordingly,” she said.
When asked whether complaints about local companies active in the cryptocurrency field should be directed to police, VPD spokesman Jason Robillard was unable to get a definitive answer.
Some of the jurisdictional uncertainty is around the question of whether cryptocurrencies are securities. While the BCSC considers bitcoin to be a commodity, Canadian securities regulators have determined some initial coin offerings are distributions of securities, Walker said.
Cristie Ford, an associate professor at the University of B.C.’s Peter A. Allard School of Law, said to her recollection no authority had deemed bitcoin, for example, to be a security.
Not all of Einstein Exchange’s customers are unhappy. Postmedia spoke to several people who forgave, or at least understood, the delays they experienced. Those customers, including Sam Condy of Victoria, were eventually verified and were able to move all or some of their assets.
“I do not believe that Einstein is a scam,” Condy wrote in an email.
“They have an office that processes applications, withdrawals, and deposits face to face (and) most of the team has reached out to me,” he said, adding that he has been able to deposit more money and move it off the platform speedily and without issue. But he said it was a poor decision for the company to take new money while working out kinks.
Many customers have taken to social media to report that the company had sorted out their concerns.
On Monday, Einstein Exchange added 30 call centre workers in Montreal to help handle customer inquiries 24/7, Gokturk said.
When Postmedia phoned the company Wednesday, the estimated wait time to speak to a representative was 27 minutes, down from recent claims of hours.