The largest cryptocurrency exchange in the US has been hit by a class action lawsuit over alleged insider trading during the launch of Bitcoin Cash(BCH) on its platforms.
The lawsuit filed with the US district court for the northern district of California on March 1 alleges that Coinbase customers lost millions as the exchange tipped off its employees and a few customers about the impending launch of bitcoin cash trading before the formal announcement. This allowed them to trade bitcoin cash earlier resulting in a sudden spike in its price, it further says.
The plaintiff Jeffery Berk, representing a group of investors that placed trading orders on Coinbase or GDAX - its order book trading platform, from December 19 to December 21 last year, has sought a jury trial in the matter.
After repeatedly saying that it would not, Coinbase finally announced in August last year that it would start trading of bitcoin cash from January 1, 2018. BCH was expected to split (technically hard fork) from bitcoin in November last year.
However, the exchange launched the BCH trading on December 20, with an announcement on the same day.
The lawsuit alleges that Coinbase tipped about this announcement to its employees and others which gave them an unfair advantage over others. That resulted in remaining customers getting BCH at an inflated price.
“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,” the lawsuit reads.
Such accusations were fired by many on social media platforms. At that time, the CEO of the firm, Brian Armstrong had said that an internal inquiry into the matter would be conducted.
“Although the Company, through its chief executive officer, Armstrong publicly announced that the Company had an insider trading policy, and that it was undertaking an internal investigation of the insider trading allegation, to date, neither Armstrong nor the Company has disclosed the result of its purported investigation,” Berk says in the lawsuit.