One of the most popular U.S.-based cryptocurrency exchanges, Coinbase, recently added Bitcoin Cash (BCH) to its platforms – Coinbase and the Global Digital Asset Exchange (GDAX) – giving the cryptocurrency momentum. The move, however, was seemingly taken advantage of by insiders looking to make a profit.
As reported by Core Media, users recently found out that Coinbase added Bitcoin Cash to its API. The overwhelming sentiment was that the exchange was, as it had announced, going to allow users to withdraw their Bitcoin Cash tokens created at the time of the hard fork, back in August. Even Litecoin creator and former Coinbase employee Charlie Lee stated the exchange would likely do that without enabling trading, as the same thing happened with Ethereum Classic (ETC).
On Tuesday however,, through a blog post, the company announced the integration of Bitcoin Cash to its platforms, following it up with a tweet letting users know about the move. The blog post read:
“Sends and receives are available immediately. Buys and sells will be available to all customers once there is sufficient liquidity on GDAX. We anticipate that this will take a few hours. See our update below.”
Later on, the company updated its users on the listing, stating that the company’s GDAX platform paused the order books due to “significant volatility,” and adding that these would be opened later on to establish liquidity on the markets. Coinbase users will only be able to buy and sell the cryptocurrency through its interface once enough liquidity is established on GDAX.
Reacting to the news, Bitcoin’s value fell to about $16,000, before quickly recovering back to $17,150 at press time. Bitcoin Cash on the other hand surged 52.58% in the last 24-hour period, to an all-time high of $3,650 according to data from Cryptocompare, before falling back to $3,200. Notably, BCH’s price surged before Coinbase made its move public, hinting at possible insider trading.
Investigating potential insider trading
Various users noted that Bitcoin Cash started pumping hours before Coinbase announced its move. This means employees might’ve leaked the news, allowing someone to take advantage of the occurrence, as being listed on Coinbase is bound to drive an asset’s value.
hey @coinbase , @GDAX and @brian_armstrong by being part of a product index for @CMEGroup you agreed to certain rules. Since bch news was clearly leaked around 2:30pm CST to certain parties. this qualifies as insider trading. Hope you enjoy the incoming complaints.
— I am Nomad (@IamNomad) December 20, 2017
Responding to the controversy, Coinbase’s CEO Brian Armstrong published a blog post detailing that the company’s trading policy prohibits employees and contractors from trading on “material non-public information,” such as the listing of a new asset.
The blog post notably adds that an investigation is being conducted, and that Armstrong won’t hesitate to fire any employee and take legal action against him if information has indeed been leaked. It reads:
“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.”