A class action lawsuit was filed against Coinbase this past Thursday on March 1 accusing the exchange of ‘insider trading’ for the bitcoin cash launch last December. The complaint filed by the plaintiff is demanding a jury trial for losses incurred on behalf of himself and the other customers involved.
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Tipping Off Employees
Last year there were some unsatisfied customers who complained about the Coinbase bitcoin cash launch. An individual named Jeffrey Berk and others similarly situated have filed a class action complaint in California against the exchange Coinbase for alleged insider trading. The 18-page lawsuit filing accuses the exchange of tipping employees a month prior to the official launch of bitcoin cash (BCH) on December 19, 2017. The case is demanding a jury trial against Coinbase Inc., GDAX, David Farmer, and Brian Armstrong.
According to Berk’s complaint, he says that customers who placed purchase, sale or trade orders on the BCH launch date suffered monetary losses due to alleged company employees tipping people off well before the release date.
“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,” explains the class action lawsuit.
Unsurprisingly, those who had been tipped off, immediately swamped Coinbase and the GDAX with buy and sell orders, thinning the liquidity but obtaining BCH at fair prices. The market effect was to unfairly drive up the price of BCH for non-insider traders once BCH came online on the Coinbase exchange.
The price of BCH that evening almost reached $10,000 USD on GDAX.
Insiders and Those Who Had Prior Knowledge
The filing says the those who were not “tipped off” were not so lucky because after insiders sold their BCH the trading platform halted all trading activities. The complaint details the exchange tried again the very next day to launch the coin but ceased trading again.
“They opened BCH for purchase, sale and trading the next day, and again within minutes, closed the books and canceled all the outstanding order while insiders and those who had prior knowledge of Coinbase’s confidential information were able to buy, sell and trade,” the complaint states.
Coinbase CEO Takes Confidentiality of Material Non-Public Information Very Seriously
The San Francisco based firm Coinbase had responded to accusations of insider trading in a blog post written by the company’s founder Brian Armstrong on December 19. In that post, Armstrong describes the firm’s internal trading and confidentiality policies. Armstrong says that the company has had internal policies in place well before the launch of BCH and all employees were prohibited from trading and talking with outsiders about the launch.
“This was communicated multiple times via multiple channels to employees — The trading restriction, which applies to all personal trading activity on any platform, remains in effect now,” the Coinbase founder details.
I take the confidentiality of material non-public information very seriously as CEO. 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.
It remains to be seen what becomes of the Berk-vs-Coinbase case filed in California. Berk is represented by two attorneys from Green and Noblin P.C., and the Grant Law Firm. The complaint is demanding a jury trial where both parties can outline their case, and present further evidence.
What do you think about the class-action lawsuit filed against Coinbase? Let us know what you think in the comments below.
Images via Shutterstock, Bitcoincash.org, Pixabay, Coinbase logo, GDAX interface, and Twitter.
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