Two class-action lawsuits have been filed against the exchange so far this month, and this one is going for the jugular. Coinbase is being accused of negligence tied to last year’s rocky rollout of Bitcoin Cash (BCH) and “tipping off” its employees before announcing publicly its plans to support the new cryptocurrency. The amount in question for all of the members of the lawsuit is more than $5 million before interest and costs.
Arizona resident Jeffrey Berk filed the lawsuit in the US District Court for the Northern District of California on behalf of himself and others affected, all of whom are being represented by Green & Noblin as well as The Grant Law Firm.
He’s taking aim at Coinbase/dba GDAX as well as its co-founder and CEO Brian Armstrong and director of communications David Farmer, alleging Armstrong knew of the alleged insider trading and promised an investigation, the results of which are unclear.
At the crux of the lawsuit is the bitcoin hard fork, the result of which was the emergence Bitcoin Cash, a cryptocurrency spinoff, so to speak, designed to accelerate transactions on the blockchain. After the bitcoin fork was announced, Coinbase allegedly waffled on its decision of whether or not to support it, which allegedly caused the plaintiffs “to suffer monetary loss as a result of the defendants’ wrongdoing.” The lawsuit states:
“As one of the largest exchanges for the purchase and sale of Bitcoin, (and
effectively a monopoly), the issue of whether Coinbase will maintain a market and support a cryptocurrency is essential to people who want to buy or sell the currencies.”
The period in question is from Dec. 19 to Dec. 21, which is when Coinbase’s alleged botched rollout of Bitcoin cash unfolded. There were, however, a series of steps leading up to this event, as outlined below –
- In July, Coinbase announced it wouldn’t support BCH
- Coinbase advised clients who wished to trade in BCH to instead withdraw their BTC from the exchange
- A wave of investors allegedly did do
- In August, Coinbase revealed partial support for BCH
Here’s the rub.
- In November 2017, Coinbase allegedly “tipped off its own employees about full support for BCH”
- Coinbase didn’t announce that development publicly till Dec. 19, 2017
- Approximately USD 11 billion of BCH was traded on Coinbase on Dec. 20
Apparently, traders who anticipated Coinbase’s full support of BCH flooded the platform with buy and sell orders, which the lawsuit alleges thinned liquidity and “unfairly drive up the price of BCH for non-insider traders once BCH came on line on the Coinbase exchange.”
The plaintiff alleges that his BCH order was transacted at a price 100% higher than when he submitted the buy order.
These events preceded even greater confusion amid a series of steps in which the bitcoin exchange allegedly stopped and started trading in BCH, opening and closing the books again and again. The bottom line is the plaintiffs allege that non-insiders were forced to purchase BCH at inflated prices.
A separate class-action lawsuit was filed against Coinbase earlier this month accusing the bitcoin exchange of holding onto emailed cryptocurrencies that it shouldn’t have that were left unclaimed for years.
Featured image from Shutterstock.
Last modified: March 4, 2021 5:05 PM