Coinbase Faces a Class Action Lawsuit for Insider Trading
Cryptocurrency exchange Coinbase has received a collective indictment. A group of investors using the stock market accuse the company of insider trading at the time that bitcoin was launched in cash.
The plaintiffs argue that Coinbase removed their employees before bitcoin cash, a spin-off of bitcoin, was added to the stock exchange informed of the launch. According to the group of investors , Coinbase tipped its own employees a month before they allowed the trading in bitcoin cash, according to the complaint filed last Thursday.
Fast trade
On December 19, 2017, Coinbase suddenly announced that they would allow trade. People who already knew that started to act immediately, which caused the price to rise very quickly.
After a few minutes, Coinbase stopped trading in bitcoin cash. All outstanding orders were canceled. Insiders had already sold their share, Coinbase himself said that trade was stopped that it could not guarantee the availability of the crypto coin and therefore stopped.
Open and close again
On December 19, more than 4400 orders were placed, of which 3461 were executed. According to the court document, this equates to $ 15.5 million in trade. The price of bitcoin cash rose by 200 percent at Coinbase to more than $ 8499.
The people who placed orders were prepared for the trade. Because they ordered so quickly there was little stock left. Within two minutes there were restrictions on the trade, claim the plaintiffs.
A day later it was possible to trade again, but also on 20 December the fair closed pretty quickly. The people who had previously received information were able to act between opening and closing during that time frame.
Investigation of insider knowledge
The rumors about insider trading soon took place. Coinbase CEO Armstrong promised that an internal investigation would be conducted into possible insider trading. He also stated that Coinbase used a policy whereby employees are not allowed to trade in bitcoin cash.
Internal research has so far not become clear, but Armstrong promised at the time to act hard if traces of insider trading were found.
On Jan. 9, Adam White, one of the managers at Coinbase, admitted that employees had been notified about the month before the launch. According to the court document 'the employees had a month to devise strategies to act, despite the formal ban'.
Collective lawsuit
The lawsuit is a so-called 'class action lawsuit', a collective lawsuit that is conducted on behalf of a large group of people. It is a typical American phenomenon. The court document also states that it is not clear how large the group is: at the time of launch, Coinbase had more than 11 million customers.
Compensation is required. The exact level of the damage, and how high any compensation should be, must be determined during the case.
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