- BiT Global has dropped its antitrust lawsuit against Coinbase.
- BiT Global sued after Coinbase delisted its wrapped Bitcoin cryptocurrency.
- Coinbase said it was just trying to protect users from controversial crypto entrepreneur Justin Sun, a BiT Global partner.
BiT Global has agreed to drop its lawsuit alleging crypto exchange Coinbase attempted to corner the market for Bitcoin-based cryptocurrencies.
BiT Global has also agreed it will not pursue the case at a later date, according to a June 6 filing signed by attorneys for both companies.
“This important win affirms our clear right to manage security and risk for @coinbase users,” Coinbase’s chief legal officer, Paul Grewal, wrote on X.
The lawsuit, filed in federal court in San Francisco, appeared to mark the first time a blockchain venture used the Sherman Antitrust Act in commercial litigation, according to crypto lawyers.
It also set off a testy exchange on social media between crypto billionaire Justin Sun and Grewal.
That’s because Coinbase said it removed BiT Global’s wrapped Bitcoin cryptocurrency after the China-based firm announced a “strategic partnership” with Sun and another firm, BitGo.
Coinbase feared Sun — one of the crypto industry’s most controversial figures — would exert “potential control” over BiT Global’s wrapped Bitcoin, wBTC. Sun was not a party to the lawsuit.
But BiT Global alleged Coinbase used Sun as a pretext for a more sinister move: an illegal attempt to corner the market for wrapped Bitcoin products.
Coinbase axed wBTC three months after it launched its own competing product: cbBTC, which now has a market value of $4.7 billion.
“Like all the centralised tech giants before it, Coinbase gives lip service to the innovation of a decentralized world,” BiT Global attorneys wrote in the lawsuit.
“It has now embarked on an effort to use that power to replace cryptocurrencies created by others with its own knock-off versions, and wBTC is Coinbase’s first target.”
The June 6 filing did not state BiT Global’s reason for dropping the lawsuit. BiT Global attorney Cyclone Covey, a lawyer at Kneupper & Covey representing the company, did not immediately return a request for comment Monday.
In January, Covey told DL News that “BiT Global does intend to prove the case through trial. It is not dropping the suit.”
Legal wrangling
Although Bitcoin is a standalone blockchain, users can move its eponymous cryptocurrency to other networks through a technical process called “wrapping.”
Users “wrap” their Bitcoin by handing it over to a custodian, such as BiT Global. The custodian then mints a new token on another blockchain, such as Ethereum. The “wrapped” Bitcoin is instantly redeemable for the Bitcoin held in custody, and, as such, trades at par with Bitcoin.
Wrapped Bitcoin products include BiT Global’s wBTC, Coinbase’s cbBTC, and tBTC, from crypto firm Thesis.
In its lawsuit, BiT Global invoked the Sherman Antitrust Act, a 135-year-old law used to break up Gilded Age monopolies such as Standard Oil.
BiT Global said the supply of wBTC dropped 5% immediately after Coinbase said it would remove the token. Moreover, the removal “sends a signal that competitors to cbBTC may be delisted at any time at Coinbase’s whim,” chilling the broader wrapped Bitcoin market, BiT Global said.
Coinbase prevailed in the first legal skirmish last year when a federal judge declined to grant BiT Global’s request to stop wBTC’s delisting.
In January, Coinbase asked a federal judge to dismiss the case. By sharing control of wBTC with Justin Sun, the company “ran the risk that responsible actors like Coinbase would stop doing business with it,” the Coinbase’s attorneys wrote.
“And that is exactly what happened.”
Coinbase argued its actions weren’t anticompetitive because BiT Global was, in fact, the largest player in the wrapped Bitcoin market. As such, Coinbase’s new cbBTC would increase competition, rather than diminish it.
Additionally, BiT Global had done little to demonstrate Coinbase had harmed the broader wrapped Bitcoin market, rather than a single competitor.
BiT Global, in turn, said that raising Sun’s legal travails was a smokescreen.
Sun has been sued by the SEC and was reportedly under investigation by the Department of Justice, Coinbase noted. (The SEC’s lawsuit was dropped this year.)
“But allegations of SEC lawsuits ring hollow when Coinbase itself has been sued by the SEC,” BiT Global’s attorneys wrote in court filings.
Moreover, a publicly-available Coinbase document “makes clear that it has a short-term plan to charge nothing for its cbBTC product,” BiT Global said — something that suggested Coinbase was willing to operate at a loss in order to get a leg up on competitors.
While Coinbase pointed to the supposed risk that Sun would take control of wBTC, it listed risky, valueless memecoins like Fartcoin, BiT Global argued.
All the while, Sun and Grewal exchanged pointed remarks online. But a brief exchange in May suggested the standoff might soon come to an end.
“Thank you for keeping the fight up for the industry and let’s do more great things together to grow crypto in the US!” Sun wrote Grewal on X.
In reply, Grewal asked Sun to drop the “ridiculous, unfounded lawsuit.”
“It’s a no-brainier [sic.] for @Coinbase and @WrappedBTC to collaborate and build a stronger Defi community,” Sun replied. “@BiTGlobalTrust please look into it.”
Aleks Gilbert is DL News’ New York-based DeFi correspondent. You can reach him at aleks@dlnews.com.
