Business 23 November 2018Ed Drake
Fresh Bitcoin Cash insider trading suit vs Coinbase goes to court
An amended class action lawsuit alleging insider trading at cryptocurrency wallet and exchange service Coinbase will go to court, after an initial application to the courts was turned down on a legal technicality.
The decision, published in court documents uploaded by Coinbase, means the case will be heard on January 31, 2019, in a district court in north California, giving the plaintiffs the chance to put their arguments in front of a judge for the first time.
The case concerns allegations of insider trading at Coinbase over its handling of the bitcoin BCH rollout in 2017, which many users had felt resulted in Coinbase staff profiting at the expense of the market.
The initial application was rejected in October, after petitioner Jeffrey Berk had failed to “describe the scope or content of Coinbase’s duty.” However, the amended filing now highlights how Coinbase breached its own listing rules, which claimants suggest will now form the basis of their class action.
According to the filing, Coinbase did in fact sell BCH at artificially inflated prices to its own benefit during the launch last year. It stated, “The sudden launch (of BCH) was effectively part of an attack by Coinbase and (CEO Brian Armstrong) to depress the price of BTC and to inflate the price of BCH, to encourage more transactions and greater profitability for Coinbase.”
“As a consequence of this scheme, the Individual Defendants and Coinbase enabled Coinbase to earn significant fees from the trades of its customers, from which Coinbase earned a spread over an inflated price for BCH, and to avoid a ‘run’ on the Company by sellers anxious to take advantage of the inflated price, by closing down trading within minutes of the Launch to all except certain insiders who were positioned to and did sell BCH at inflated prices during the Launch,” according to the filing.
Coinbase has until December 20 to file a response to the claim, ahead of its court hearing at the end of January.
The judge who ruled on the first filing, District Judge Vince Chhabria, accepted that Coinbase had “bungled” the rollout of BCH.
The firm has since conducted its own internal investigation, which perhaps unsurprisingly found no foul play.
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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