Business 25 July 2018Gerald Fenech
No insider trading: Coinbase wraps up Bitcoin Cash probe
Coinbase, considered as the largest cryptocurrency exchange in the United States, has reportedly concluded an inquiry into the alleged improper Bitcoin Cash (BCH) trading, according to Fortune. The inquiry was launched last December after it was noted that as soon as Coinbase announced the adding of Bitcoin BCH as a trading asset, the price of the cryptocurrency spiked uncontrollably—reaching the $4,000 level in a matter of hours.
Coinbase’s integration of Bitcoin BCH allowed the cryptocurrency to become accessible to millions of customers who previously had no way of acquiring the crypto. This resulted in the sudden spike in BCH’s price, a similar occurrence when Coinbase added Litecoin to its listing. At the time, the price of Litecoin rose to in excess of $300 in a few days after the exchange’s announcement.
However, the price jump for Bitcoin BCH preceded the official announcement, and this prompted legitimate questions over whether Coinbase employees had acted on inside knowledge to buy Bitcoin Cash ahead of the market.
A spokesperson for Coinbase confirmed to Fortune that the months-long investigation conducted by two U.S.-based law firms on the alleged insider trading concluded last week. The official noted that Coinbase “would not hesitate to terminate an employee or contractor and/or take appropriate legal action” if there’s evidence that the company’s policies have been violated. In this case, however, Coinbase “determined to take no disciplinary action” after the voluntary, independent internal probe wrapped up.
After the August 2017 hard fork, which is essentially the rebirth of Bitcoin on the original blockchain, Coinbase initially announced that it would not support Bitcoin Cash—incurring the wrath of many of its customers. Eventually, Coinbase changed its position on Bitcoin Cash and announced that it would be distributing the currency by January 1, 2018. However, it then handed out the currency earlier than anticipated in December 2017.
In the hours before the unexpected announcement, the price of Bitcoin Cash climbed significantly, which led to speculation that Coinbase insiders expected the price to jump on news, and were looking to profit on the information. Additionally, a flood in trading volume forced Coinbase to temporarily suspend trading of Bitcoin Cash altogether.
The incident caused an uproar in the crypto community. In response to the outcry, Coinbase CEO Brian Armstrong published a strongly worded blog post about its employee trading policy and warned that Coinbase would terminate contracts and commence legal action against anyone who broke it.
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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