Coinbase Hit by Lawsuit Over Alleged Insider Trading
Cryptocurrency exchange Coinbase has been hit by a class action lawsuit over alleged insider trading during its launch of bitcoin cash.
According to a court document dated last Thursday, the case has been brought by Jeffery Berk, representing a group of investors that placed trading orders on Coinbase or its order book trading platform GDAX from Dec. 19-21, 2017.
Based on the complaint, the case takes aim at Coinbase's launch of bitcoin cash (BCH) trading in the same month, with the plaintiffs accusing the company of tipping off insiders ahead of the formal launch. As such, the group accuses the firm of negligence, and is seeking damages, the amount of which will be decided at trial.
As previously reported, San Francisco-based Coinbase first announced in August that it would support bitcoin cash - a new crypto asset that was forked from the bitcoin blockchain in November. At the time, the exchange said the new service would go live by Jan. 1, after which investors would be able to withdraw bitcoin cash.
When Coinbase launched BCH trading on Dec. 20, BCH prices spiked just prior to the announcement and accusations soon appeared on social media suggesting that employees of the firm might have tipped off others in advance. The company responded to the claims by announcing it would conduct an investigation into whether any staff members may have violated its insider trading rules.
However, the plaintiffs allege that the firm has never revealed the full results of its investigation and that it has violated California's Unfair Competition Law.
The complaint states:
"When Coinbase's customers' trades were finally executed, it was only after the insiders had driven up the price of BCH, and thus the remaining bitcoin customers only received their BCH at artificially inflated prices that had been manipulated well beyond the fair market value of BCH at that time."
Disclosure: CoinDesk is a subsidiary of Digital Currency Group, which has an ownership stake in Coinbase.
Court gavel image via Shutterstock