Business 5 March 2018Erik Gibbs
Class-action lawsuit accuses Coinbase of insider trading
Last week, a class-action lawsuit was filed against Coinbase, accusing the popular cryptocurrency exchange of insider trading. The allegations stemmed from the inclusion of Bitcoin Cash (BCH) in December of last year. In the suit, the plaintiff was looking for a jury trial to argue for the recuperation of losses he and other investors incurred in conjunction with the launch.
First, a little background for those that may have missed it. When Coinbase announced that Bitcoin Cash trading was live, the digital currency’s price skyrocketed. Investors jumped on both Coinbase and its sister exchange, GDAX, and BCH jumped to $8,500 in four minutes. Coinbase then turned off the lights on BCH and trading was suspended. Those that had already put their money into the coin had no way to exit prior to Coinbase’s move, and were left taking a hit as BCH’s price normalized to that found on other exchanges.
This was when the accusations of insider trading started to fly. Coinbase was accused of allowing its inner circle to win big on the announcement of the trading, which it vehemently denied. Since an entire team of people was required to facilitate the launch, it’s impossible to keep the move a secret. Most weren’t buying the rebuttal, though, and talks of a lawsuit began to make their way through crypto circles on social media.
The newly-submitted, 18-page lawsuit alleged that Coinbase tipped its employees a full month prior to the official launch. The complaint stated that customers who placed trade, purchase or sale orders on the BCH launch date incurred significant financial losses. An excerpt from the suit reads: “On December 19, 2017, a month after tipping off its own employees as to when it would commence fully supporting BCH, Coinbase suddenly announced that it was opening up its books to the buying and selling of BCH within minutes after its announcements.”
Coinbase Inc., GDAX, David Farmer and Coinbase CEO Brian Armstrong were all named as defendants in the lawsuit. It was filed in California and led by Jeffrey Berk, an investor who claimed to have lost a substantial amount of money as a result of the debacle. Berk was represented by Green and Noblin P.C. and the Grant Law Firm. There was no information available regarding how much money was potentially lost by the investors.
Note: Tokens on the Bitcoin Core (SegWit) chain are referenced as BTC coins; tokens on the Bitcoin Cash ABC chain are referenced as BCH, BCH-ABC or BAB coins.
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