Coinbase responds to Justin Sun-connected BiT Global’s lawsuit over delisting wBTC
2024-12-18
Category: None

Coinbase has filed a response to a lawsuit filed by Justin Sun-affiliated BiT Global that sought an emergency injunction to keep wBTC, the first and largest tokenized bitcoin product, on the largest U.S. crypto exchange. 
“We've filed our response to BiT Global’s effort to stop our delisting of wBTC before any discovery or even formal response to their bogus claims,” Coinbase Chief Legal Officer Paul Grewal said on X. “We lay out why this lawsuit lacks any semblance of merit and why their request for a [temporary restraining order] should be denied.” 
The move comes amid a period of transition for wBTC, which is now partially maintained by BiT Global and its Singaporean subsidiary rather than solely its original custodian, BitGo. In August, BitGo disclosed it was sharing two out of the three wBTC keys with those two entities in a bid to make the protocol more resilient. 
In response, a number of cryptocurrency industry players raised concerns about TRON founder Justin Sun’s involvement in the protocol, citing previous regulatory happenstances and investigations for fraud and market manipulation. 
Coinbase announced in November that it would delist wBTC on Dec. 19 due to these concerns raised following a periodic review of its “listing standards.” BiT Global sued the exchange in response, arguing that the decision was anti-competitive. 
In particular, the new wBTC custodian argued Coinbase engaged in predatory practices to promote a rival tokenized bitcoin product, cbBTC, including the spreading of defamatory statements and “fear, uncertainty and doubt” about wBTC’s regulatory standing and stability. 
WBTC is a token with a current market capitalization of over $13.4 billion that enables users to bring BTC liquidity onto dapp-friendly blockchains like Ethereum. By comparison, Coinbase’s cbBTC token has a market cap of around $2 billion. 
Under the partnership, BitGo will continue to manage wBTC operations while the two BiT Global entities will act as the custodian of the underlying wBTC collateral. 
'Unacceptable risk'
“Coinbase made the decision — based on a rigorous internal process — that wBTC should be delisted from Coinbase’s exchange due to the unacceptable risk that control of wBTC would fall into the hands of Justin Sun,” the exchange wrote in its complaint, citing the “repeated” allegations of “financial misconduct.”
The exchange added that Sun has been sued by the U.S. Securities and Exchange Commission for fraud and market manipulation and is rumored to be under investigation by the FBI and the U.S. Attorney’s Office for the Southern District of New York for “potential criminal wrongdoing.” Last year, Coinbase closed several accounts of entities associated with Sun for violating its terms of service.
“BiT seeks to force Coinbase to do business with an entity that no longer complies with Coinbase’s standards due to Mr. Sun’s ‘material[] involve[ment],’” the exchange said. “And yet, Mr. Sun’s name and connection to wBTC is conspicuously absent from BiT’s Complaint and TRO request.
For its part, BiT Global argued Coinbase violated several federal and state laws — including the Sherman Act and Lanham Act — designed to prohibit unfair monopolies and promote competition by seeking to corner the wrapped bitcoin market. It also argued that Coinbase engaged in “trade libel” by removing wBTC while listing memecoins like MOG, PEPE and WIF.
In its filing, Coinbase noted that its platform accounted for less than 1% of transactions involving wBTC, which it argues minimized BiT Global’s damages claims. 
Disclaimer: The Block is an independent media outlet that delivers news, research, and data. As of November 2023, Foresight Ventures is a majority investor of The Block. Foresight Ventures invests in other companies in the crypto space. Crypto exchange Bitget is an anchor LP for Foresight Ventures. The Block continues to operate independently to deliver objective, impactful, and timely information about the crypto industry. Here are our current financial disclosures.
© 2024 The Block. All Rights Reserved. This article is provided for informational purposes only. It is not offered or intended to be used as legal, tax, investment, financial, or other advice.