A few months ago, everyone and their dog were dipping their toes into stablecoins. Considering the massive volatility, stablecoins are absolutely necessary. But, it’s always easier to create a terrible project calling it algorithmic than to provide liquidity to back your project. Cardano for example, picked the worst tie in history of crypto to issue their algorithmic project Djed. Well, right in the middle of this worst time, the GYEN stablecoin or at least stablecoin look-alike failed miserably. And the customers are in rage. Coinbase customers have raised a lawsuit against Coinbase over the little known crypto project. Much like other scenarios, customers have lost millions of dollars and Coinbase is hiring lawyers instead of admitting their mistakes.
Simply put, GYEN stablecoin was meant to maintain peg to Japanese Yen. GYEN, the small crypto project was clearly advertised on Coinbase as a stablecoin. In that regard, according to customers, Coinbase was misleading them into believing that GYEN stablecoin was equal in price to Japanese Yen.
Interestingly, GYEN did lose peg to yen but it actually went up instead of pulling a UST and falling down to oblivion. What happened was that severe buying pressure pushed the price higher. Subsequently, GYEN went from $0.008 to $0.04 on November 13. Following this growth, the price plummeted back down to its peg. During the volatility, numerous customers made purchases thinking that it was the stable value and therefore lost a lot of capital.
On November 19, crypto exchange Coinbase halted all activities involving GYEN stablecoin due to technical reasons. Rightfully, the customers are asking two questions. First, why didn’t Coinbase warn investors that GYEN had lost peg and was about to drop. Second, for a small-time project with awful standards and liquidity, how did the exchange giant Coinbase approve of this. And with such low standards, how many other similarly terrible projects are currently on Coinbase ready to implode?
According to a complaint revealed by Bloomberg, customers are accusing Coinbase of misleading them.
“Investors placed orders believing the coin’s value was, as advertised, equal to the yen, but the tokens they were purchasing were worth up to seven times more than the yen… Just as suddenly, the GYEN’s value plunged back to the peg – falling 80% in one day.”
Coinbase also froze trading amid the volatility, which prevented GYEN holders from being able to sell their coins, leading to losses of “untold millions in a matter of hours,” said investors in their complaint.
Furthermore, a group of investors also talked on how Coinbase prohibited investors from liquidating which made them lose a lot more.
“[Due to] the omission of the fact that GYEN was not designed to hold a value pegged to the yen, and Coinbase’s restriction prohibiting investors from liquidating their GYEN as it plummeted, several hundred purchasers lost vast sums, some losing hundreds of thousands of dollars in just hours, causing them grief, anxiety, stress, and outrage.”