Coinbase to conduct internal investigation

Coinbase suspects its employees may have tried to make a quick buck off its launch of bitcoin cash (BCH) on the platform     
20 December 2017   1709

One of the largest cryptocurrency exchanges, announced on Tuesday that it starts BCH trading. In few hours, this hardfork of Bitcoin reached $8,500 on Coinbase’s GDAX platform. It is almost 3 times higher than the 3,500 price being quoted on other exchanges. Shortly, BCH trading was suspended on GDAX, due to “significant volatility” and signs of foul play. This is reported by the Investopedia. 

On the next day, 20.12.2017, CEO Brian Armstrong published the blog post, saying the price of BCH on other exchanges began increasing hours before his company made its announcement, indicating that employees who knew about the launch engaged in insider trading. Armstrong noted that Coinbase is currently looking into the matter. 

Given the price increase in the hours leading up the announcement, we will be conducting an investigation into this matter. If we find evidence of any employee or contractor violating our policies — directly or indirectly — I will not hesitate to terminate the employee immediately and take appropriate legal action.

Brian Armstrong

CEO, Coinbase

Armstrong also added that Coinbase staff, together with their family and friends, had been forbidden from trading BCH for the past month as the company prepared to make the coin available on its own exchange. He added that a similar policy was also adopted before the San Francisco-based firm began supporting Ether and Litecoin. 

We’ve had a trading policy in place for some time at Coinbase. The policy prohibits employees and contractors from trading on “material non-public information”, such as when a new asset will be added to our platform. In addition to trading restrictions, it prohibits communication of material non-public information outside the company. This includes to friends and family.

Brian Armstrong

CEO, Coinbase

Coinbase is going to add BCH trading on Wednesday again.

Coinbase to Appear in San Francisco District Court

Exchange representatives must appear in court due to issues related to BCH trading launch in 2017
07 August 2019   169

San Francisco District Court judge Vince Chhabria ruled that the latter showed negligence and “clear incompetence generated by haste” when it started trading in Bitcoin Cash (BCH) on Coinbase. Now Coinbase, apparently, will be forced to stand trial, Bloomberg reports.

So, at the end of 2017, the exchange opened BCH trading, but was forced to suspend operations after 2 minutes due to high volatility and suspicious price increases - the coin began to grow rapidly several hours before the announcement of Coinbase.

Then the company was accused of insider trading, later crypto enthusiasts even began to find confirmation of this.

According to the judge, the users who bought VSN at inflated prices were primarily affected. He noted that the suspension of trading was too hasty and disrupted the normal functioning of the market.

BCH buyers claim that Coinbase could have announced a bid in advance to prevent a price spike, but it did not. The judge agreed with this opinion and noted that shortly before the launch of BCH trading on Coinbase, the Chicago Mercantile Exchange opened trading in bitcoin futures, which could become a factor of too much market participants' recovery.

According to the publication, Coinbase has not yet commented on the court decision.

Recall that in March 2018, a class action lawsuit was filed against the company, in which Coinbase was accused of “artificially overpricing” Bitcoin Cash through trading based on insider data.