Top cryptocurrency exchange Coinbase is facing two federal class action lawsuits, including allegations that it engaged in insider trading during its launch of Bitcoin Cash (BCH) last year. The suits, filed March 1st and March 2nd, claim that Bitcoin tipped off its employees that BCH trading would open within the month – prompting a flurry of trading activity that saw the price of the digital coin skyrocket by almost 200%. Lawyers representing consumers in the California cases say the unfair insider knowledge put buyers at a disadvantage.
What is Coinbase and what has it done wrong?
The exchange is one of the leaders in cryptocurrency trading right now, with an estimated market cap of close to $1 billion. It launched Bitcoin Cash back in December 2017, but immediately the launch was hit with these allegations of insider trading. The exchange suspended all BCH trading just four hours after the launch, and launched an internal probe.
Coinbase employees are prohibited from “trading on ‘material non-public information,’ such as when a new asset will be added to our platform,” said CEO Brian Armstrong in a statement in December. The company maintains that it did not give information to its employees, though no public update has been given on action taken due to its internal investigation.
Cases launched to challenge insider trading activity
The first and most serious suit, filed by Jeffrey Berk on behalf of himself and other Coinbase consumers, argues that Bitcoin employees artificially inflated the price of Bitcoin Cash after receiving a tip-off from their bosses. “The market effect was to unfairly drive up the price of BCH for non-insider traders once BCH came on line on the Coinbase exchange,” the court documents conclude.
The second case relates to a breach of California’s Unfair Competition Law and its Unclaimed Property Law. Filed by Timothy G. Faasse and Jeffrey Hansen, it argues that Coinbase has withheld funds that belong to consumers. “Instead of notifying Plaintiffs and the Class they had unclaimed Cryptocurrencies, or turning those Cryptocurrencies over to the State of California as required by California’s Unclaimed Property Law… Coinbase kept them,” notes the second suit.
Both cases will be heard by California’s federal courts in the coming months. In the meantime, Coinbase is operating as usual with plans to expand its operations further. The exchange will add 90 new support agents this week, and is expected to add Ripple to its exchange currencies in the coming days or weeks.
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