Coinbase Hit with Lawsuit over Bitcoin Cash Launch
Coinbase is in yet another legal tussle, this time in the form of a class action suit that accuses the company of insider trading. The legal struggle comes on the heels of the IRS legal battle which BTCManager reported on Thursday, March 1, 2018. Coinbase, one of the largest cryptocurrency exchange platforms in the world is now facing allegations of insider trading. The lawsuit alleges that employees of the exchange platform, as well as a few with insider knowledge, had access to non-public information which influenced their investment in Bitcoin Cash (BCH), a fork of the bitcoin cryptocurrency.
Details of the Lawsuit
The complaint filed in the lawsuit details how the price of BCH was artificially driven up in the immediate aftermath of the decision by Coinbase to open trading in the cryptocurrency. Mere moments after the announcement by Coinbase, the price of BCH on the exchange had more than doubled due to the execution of alleged massive amounts of buy and sell orders executed by those with access to insider information. The suit also calls into question the validity of the assertion by Brian Armstrong, the CEO of Coinbase, that an internal investigation would be carried out about the matter.
The suit was filed on Thursday, March 1, 2018, in the District Court for the Northern District of California. It was recorded by the Grant Law Firm, New York and Green & Noblin, California. Jeffrey Berk, a resident of Arizona, is the named plaintiff (face case) of the class action suit. He alleges that his buy order was executed at double the price that he had submitted when placing the order. Though the details of the suit have wordings that point to insider trading, it is the California Unfair Competition Law that is cited as the argument in the suit that was filed with the Court. The reason for this is likely because that BCH is not classified as a security by regulatory bodies.
Cause for Suspicion and Controversy
Coinbase had initially declared that they would not support trading in BCH on the platform. Coinbase then did a complete 180 and announced that it would indeed start offering support for trading in BCH. The original start date that was given was January 2018, but on December 20, 2017, the platform opened trading in BCH. Less than two hours after the announcement was made, the Coinbase twitter account released an ominous tweet that spoke about policies and internal guidelines that prohibited insider trading activities. The tweet led to widespread speculation of some form of malpractice especially when the price and volume of BCH trade increased dramatically in just a few short hours following the Coinbase announcement.
As per Coinbase blog post-release which said that employees of the exchange platform were barred from trading in BCH. The post stated that Coinbase employees had been informed about the platform’s move to begin trading in BCH and that they were told not to disseminate this information to people outside of Coinbase.