Last December, Coinbase announced that customers on their platform will be able to buy, sell and receive Bitcoin Cash on their platform. Right after the announcement, the price of Bitcoin Cash skyrocket from $3,100 to $8,499 – a mind-boggling 174.16% price increase.
The absurd increase in price led to allegations of insider trading, or front-running – the act of buying huge amounts of a certain stock on advance information provided by their brokers and investment analysts. In this case, Coinbase employees and affiliates were the ones under scrutiny.
Right after the Bitcoin Cash fiasco, Coinbase CEO Brian Armstrong expressed his intentions to launch an insider trading probe on Coinbase employees, via a blog post.
“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.”
Despite this, no concrete action was taken against the exchange itself, at least not from a legal standpoint.
However, all this ended last Thursday.
Arizona Citizen Stands Up for Fellow Coinbase Users
According to The Recorder Law, Coinbase now faces a class action lawsuit from Coinbase user Jeffery Berk, who claims that its employees and other insiders benefited from trading on non-public information about the release of Bitcoin Cash on Coinbase’s platform last December.
Berk, who is an Arizona resident, filed the complaint in the US District Court for the Northern District of California on Thursday, March 1. He was represented by two law firms.
Below is an excerpt from the lawsuit:
“This is a class action on behalf of all Coinbase customers who placed purchase, sale or trade orders with Coinbase or the GDAX in connection with Coinbase’s launch of BCH during the period of December 19, 2017 through and including December 21, 2017…and who suffered monetary loss as a result of Defendants’ wrongdoing.”
In the lawsuit, the plaintiff, Berk, accuses Coinbase of the “artificially inflated prices” of Bitcoin Cash minutes after Coinbase launched the forked version of Bitcoin on its platform on Dec. 19, 2017.
This isn’t the first time Coinbase has come under heavy scrutiny from the authorities. Just last week, on Feb. 23, Coinbase informed 13,000 of its “high-transacting” users that their information will be handed over to the Internal Revenue Service (IRS) after receiving a legal order as a result of an ongoing legal conflict between the IRS and the crypto exchange platform.