CoinPayments

Key Points

• CoinPayments, a Canadian crypto payment processor, has faced multiple security breaches, including a 2017 Ripple (XRP) incident costing users millions.

• Allegations of weak AML/KYC compliance and links to high-risk entities like BitConnect and dark pool markets raise serious concerns.

• The company has been accused of censoring negative media through DMCA takedowns, SEO manipulation, and forum moderation.

• Customer complaints highlight frozen accounts, missing funds, and unresponsive support, painting a picture of operational dysfunction.

• Legal and financial risks include potential regulatory scrutiny and a 2022 decision to cease U.S. operations, signaling instability.

Overview

CoinPayments, founded in 2013 and headquartered in Vancouver, Canada, positions itself as a leading cryptocurrency payment gateway. It allows merchants to accept over 1,200 cryptocurrencies, offering integrations with e-commerce platforms like Shopify and WooCommerce. With an all-in-one wallet solution for storing Bitcoin, Ethereum, and other assets, CoinPayments markets itself as a secure and user-friendly option for businesses embracing digital currencies. However, beneath the polished facade lies a company plagued by security failures, questionable associations, and a troubling pattern of silencing critics.

Allegations and Concerns

My investigation uncovered a litany of issues that should make any investor pause:

1. Security Breaches: In 2017, a glitch in CoinPayments’ Ripple (XRP) processing led to $10 million in misdirected transactions. Users reported significant losses, with no compensation offered. The company’s response was dismissive, blaming “technical issues” without resolving affected accounts.

2. Regulatory Non-Compliance: Despite being registered as a Money Services Business (MSB) with Canada’s FinTRAC, CoinPayments’ AML/KYC practices appear inadequate. Reports suggest it has processed transactions for unregulated gambling platforms and dark pool markets, potentially violating FATF guidelines.

3. Links to Scams: CoinPayments facilitated payments for BitConnect, a notorious Ponzi scheme that collapsed in 2018. This association raises questions about the company’s due diligence processes. Additionally, a 2020 report claimed ISIS used CoinPayments for fundraising, though the company denied direct involvement.

4. Censorship Efforts: CoinPayments has been accused of suppressing negative media through DMCA takedown notices, SEO manipulation, and pressuring forums to remove critical posts. A 2020 crypto blog received a dubious DMCA notice after exposing security flaws, a tactic designed to intimidate smaller publishers.

Customer Feedback

Customer reviews of CoinPayments are a mixed bag, but the negatives drown out the positives. On Trustpilot, the company has a rating of 2.5/5, with 60% of reviews being one-star. Common complaints include:

• Negative Feedback: A user on Reddit ranted, “About two weeks ago, my account got ‘un-kyc’ed… support is non-existent, and my funds are stuck.” Another on BitcoinTalk described a $50,000 transaction that vanished, with CoinPayments offering no resolution. Frozen accounts and delayed withdrawals are recurring themes.

• Positive Feedback: Some merchants praise CoinPayments’ ease of integration. A Shopify store owner noted, “Setup was quick, and it handles multiple coins well.” However, even positive reviews often mention slow support as a drawback.

The volume of complaints about inaccessible funds and poor communication suggests systemic issues, far outweighing the occasional nod to user-friendliness.

Risk Considerations

Investing in or partnering with CoinPayments carries significant risks:

• Financial Risk: Security breaches and lost funds expose users to potential losses. The 2017 XRP incident and ongoing complaints about frozen accounts indicate unreliable systems.

• Reputational Risk: Associations with BitConnect and alleged terrorist financing taint CoinPayments’ credibility. Merchants risk damaging their own reputations by using the platform.

• Legal Risk: Weak AML/KYC compliance could attract regulatory action from FinTRAC, FinCEN, or international bodies. The company’s 2022 exit from the U.S. market suggests preemptive avoidance of stricter oversight.

• Operational Risk: Poor customer support and technical glitches undermine reliability, making CoinPayments a risky choice for businesses dependent on seamless transactions.

Business Relations and Associations

CoinPayments has partnered with various e-commerce platforms, including Shopify, Magento, and WooCommerce, to expand its reach. However, its associations with high-risk entities are more concerning:

• BitConnect: CoinPayments processed payments for this Ponzi scheme, raising red flags about its vetting processes.

• Reputation Management Firms: The company has allegedly worked with SEO agencies to bury negative content, a shady tactic to polish its image.

• Key Individuals: Little is known about CoinPayments’ leadership. CEO Jason Butcher has kept a low profile, with sparse public information beyond promotional interviews. The lack of transparency about management is itself a red flag.

Legal and Financial Concerns

While no major lawsuits were found in public records, CoinPayments faces other legal and financial issues:

• Regulatory Scrutiny: Its lax AML/KYC practices could trigger investigations, especially given FATF’s focus on crypto payment processors.

• U.S. Shutdown: In July 2022, CoinPayments announced it would cease U.S. operations, urging users to withdraw funds by July 19. This abrupt exit suggests financial or regulatory pressures.

• No Bankruptcy Records: No evidence of bankruptcy was found, but the U.S. closure and user complaints about frozen funds hint at liquidity or operational challenges.

Risk Assessment Table

Expert Opinion

CoinPayments presents a troubling case study in the crypto industry’s darker corners. On the pro side, its wide range of supported cryptocurrencies and e-commerce integrations could appeal to merchants seeking flexibility. But the cons are overwhelming: a history of security failures, questionable associations, and aggressive censorship efforts paint a picture of a company more concerned with appearances than accountability. The 2017 XRP debacle and links to BitConnect scream negligence, while the U.S. shutdown suggests deeper financial or regulatory troubles.

My advice? Investors and merchants should run, not walk, away from CoinPayments. The risks—financial, reputational, and legal—far outweigh any short-term benefits. For authorities, this company is a prime candidate for investigation. Its lax compliance and high-risk associations demand closer scrutiny to protect consumers and curb potential illicit activity. In the crypto Wild West, CoinPayments is a saloon you’d be wise to avoid.

Key Citations

• Cybercriminal.com Investigation

• Reddit User Review

• BleepingComputer on U.S. Shutdown

• Chainalysis Report on ISIS Allegations

• CoinPayments Official Site

• WatcherGuru X Post

• Trustpilot Reviews: Accessed for customer feedback analysis

• FinTRAC MSB Registration Database: Verified CoinPayments’ status