Being the largest cryptocurrency exchanges in the world, Coinbase is attracting many lawsuits from the platform users who claim it could be engaging in insider trading. Previously, Coinbase had battled a bitter legal suit from IRS that led to the government agency’s slight win. This lawsuit is not, therefore, the first one. But it could have damaging repercussions for the company in the long run.
These allegations leveled against Coinbase regarding insider trading on Bitcoin Cash cannot be taken lightly. Although it remains to be established if there is any iota of truth in the allegations, the lawsuit brings to the fore an interesting scenario. It is claimed that Coinbase employees and other insiders benefitted greatly from the information they had beforehand that Bitcoin Cash trading was going live on the Coinbase platform. This information had not been shared with the public and these insiders benefitted by reaping big from this undue advantage.
The insiders are also accused of probably being behind the partial halting of BCH trading on the platform in the few hours after the trading pair went live. It is important to recall that at that time, Bitcoin Cash value spiked on the exchange by over 200% in mere minutes after the launch of trading. This confused many users and also led to some friction among them.
Coinbase halted all BCH trading at that time. According to the lawsuit, some users were forced to pay artificially inflated prices which were manipulated to be well beyond the actual BCH value at the time. This was a disadvantage that should have been avoided if the insider trading had not taken place. While this is a damning allegation, confirming and [proving it in a law court may be a herculean task but we wait and see. For instance, it is true that some people purchased BCH at several thousands of dollars over the actual market price but whether this was purely a Coinbase fault cannot be determined.
This lawsuit originates from an Arizona resident who was directly affected by the Bitcoin Cash trading debacle. In his claim, Jeffrey Berk says that his purchase order was processed at twice the value at which he’d originally submitted it. It remains to be seen how true this statement is.
The lawsuit was filed by Green & Noblin, a law firm based in California. They are also joined by Grant Law Firm in New York. It is an interesting lawsuit that all eyes will be focusing on. In this lawsuit, there is a reference to California’s Unfair Competition Law and common law negligence, which is significant in light of the current lack of cryptocurrency regulation. Berk may not be favored by this case, but it is too early to come to this conclusion as the case is still unraveling.