Coinbase: Brian Armstrong's Custody Bet, an Insider Trade and the SEC Fight

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Coinbase began in 2012 when Brian Armstrong, a software engineer at Airbnb, received $150,000 from Y Combinator and recruited former Goldman Sachs trader Fred Ehrsam after spotting him on Reddit. A third founder, British programmer Ben Reeves, split with Armstrong over custody: Reeves wanted users to hold their own keys, while Armstrong wanted Coinbase to hold them like a bank. The company reached a million users by 2014, insured the Bitcoin on its servers, drew investment from Andreessen Horowitz and the New York Stock Exchange, and partnered with Dell, Expedia and Dish Network. In 2019 its security team stopped an attack that used fake Cambridge University pages and Firefox zero-day flaws. In 2020 it declared itself remote first with no headquarters, and Armstrong offered severance to employees who disagreed with his apolitical mission policy.

Coinbase listed on Nasdaq in April 2021, posted $7.8 billion in revenue that year and briefly reached a $47 billion valuation, then lost over $2.6 billion in 2022 and cut about 18 percent of staff. Former product manager Ishan Wahi was caught tipping off his brother and a friend about upcoming token listings, was stopped before a May 16 flight to India, and received two years in prison. New York regulators fined the company $50 million, and the SEC sued in June 2023, calling it an unregistered exchange, broker and clearing agency. The SEC dropped the case in February 2025 and Coinbase joined the S&P 500. By the 2026 cycle it had given over $57 million in political contributions, largely to the Fairshake super PAC.

• In December 2021 a display glitch briefly showed some users trillion-dollar balances.
• Coinbase controls roughly 12 percent of all Bitcoin and holds over half a trillion dollars in digital assets.
• In 2021 it eliminated salary negotiations, giving the same offer to anyone in the same role and location.
• Its compliance team had a backlog of 100,000 uninvestigated alerts.
• Refusing a $20 million ransom in May 2025, it offered a $20 million bounty and committed up to $400 million to reimburse customers.