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The leading bitcoin brokerage is under fire for possible insider trading


On Tuesday, Dec. 19, the value of bitcoin cash, a spinoff cryptocurrency from the original bitcoin, suddenly surged to a record-high of $3,704 per coin.

That evening, Coinbase, the No. 1 mainstream brokerage for buying bitcoin, announced it was adding bitcoin cash to its platform. The announcement means that Coinbase users, as well as users of Coinbase’s separate institutional exchange GDAX, can now buy and sell bitcoin cash. It makes bitcoin cash the fourth coin added to Coinbase, along with bitcoin, ether, and litecoin. And it is big news for the legitimacy of bitcoin cash.

But Coinbase was swiftly accused of insider trading, since it appears possible that people who knew about Coinbase’s announcement bought up bitcoin cash beforehand to stoke the price.

“Insider trading of crypto is so obvious,” tweeted Brian Hoffman, founder of the bitcoin marketplace OpenBazaar. “BCH skyrockets… hours later Coinbase rolls it out.” Another Twitter user suggested that the news Coinbase would add bitcoin cash “was clearly leaked around 2:30pm CST to certain parties. this qualifies as insider trading. Hope you enjoy the incoming complaints.”

Within minutes, late on Tuesday night, Coinbase CEO Brian Armstrong wrote a blog post in which he laid out Coinbase’s employee trading policy and announced that the company will investigate possible insider trading by its own employees.

“We’ve had a trading policy in place for some time at Coinbase. The policy prohibits employees and contractors from trading on “material non-public information,” such as when a new asset will be added to our platform,” Armstrong wrote. “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.”

Bitcoin cash resulted from a fork of the bitcoin blockchain on Aug. 1 of this year. The fork was intended to create a separate blockchain that could move faster. The original bitcoin blockchain has a block size limit of 1 MB, while bitcoin cash runs on a blockchain with block size limit of 8 MB.

Coinbase had to halt trading of bitcoin cash on its platform just four minutes after adding it on Tuesday night. It says BCH trading will resume at noon EST on Wednesday.

Disclosure: The author owns less than 1 bitcoin, purchased in 2015 for reporting purposes.

Daniel Roberts covers bitcoin and blockchain at Yahoo Finance. Follow him on Twitter at @readDanwrite.

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