Therefore, coinbase could never do anything with your funds. They stand to gain nothing by faking that the orders are fraud.
They're not faking. They have the orders and the cash to back it up. They use the collective clout to get coins on the market and then they divvy them up to themselves and their customers. Not all of their customers get coins. The smaller ones get their money back...someday.
They can't get Bitcoins with money that they don't have. They never actually withdraw the funds, so they didn't have any money to buy Bitcoins with! ACH transfers are not the same as cash on the market. Bank drafts are, ACH transfers aren't.
Also, if they're not faking the fraud detection, then wtf is this thread about? ANY legit financial business is going to have fraud detection. They're not scamming or cheating anyone!
Actually, you can't tell. Here's how the scam works:
- You give CB the ability to take your cash in trade for a promise that they'll give you btc at a certain rate.
- CB spends some cash they already have to buy some btc at the rate (minus their 1%, of course).
- CB now has the ability to sell some btc that they just bought with their own money, but they wait to see:
- A) what the price does, and
- B) How likely it is that you'll do a charge back.
- A few days later, the price is either higher or lower:
- If it's higher, they sell their btc and send you a "fraud notice", but only on one out of a thousand transactions that are for enough btc to make it worth their while. On the other 999 transactions that they deem worthy of scamming, they do what they'd do if it's lower:
- If it's lower, they sell their btc to you as you wanted and get their 1% fee.
The point is that they don't need our money if they already have some (which, of course, they do).
However, I think its foolish to expect other people not to scam you if you don't make it difficult for them to scam you. The easiest way to make it difficult is to be one of the squeaky wheels. Make it easy for the public to see whether or not your counterparty is scamming you. Bitcoin was designed with this principle in mind. See what Satoshi said about it - it's in my signature. When you publish enough, it becomes difficult for the scammer to use you as a mark. At that point, if they're smart (Coinbase is pretty smart), they will use you as an unwitting shill.
If I suspect that I am being used as an unwitting shill to support a long con, and I know that I am benefiting from it (whether I'm a con or not), is it immoral for me to present both sides of the question and suggest that I believe the operators are legit? For me, they are legit, perhaps only because I have made it too difficult for them to con me. If they are scammers, but smart enough, they can play it in a way that makes it difficult for me to find out for sure if it's a con.
The opportunity exists for a small team to devise a plan that produces the evidence required to prove (to those willing to consider it and smart enough to understand it) that it is a con. You can't prove it isn't a con, because every trusted person can abuse the trust, making the interaction that created the trust into a long con. But you can prove it is a con, IF it is a con. It just takes a lot of work. You can view bitcoin as the "lot of work" required to prove that fiat currency is a long con.
