This week a class action lawsuit was filed against Coinbase accusing the exchange of practicing “insider trading” when Bitcoin Cash was launched on December last year. The complaint demands a jury trial for the case.

The Accusations Against Coinbase In BCH Lawsuit

During the end of last year, some customers complained about how Coinbase handled the Bitcoin Cash launch. A person called Jeffrey Berk and other individuals have filed a lawsuit against the exchange in California for accusations of alleged insider trading.

The document of the lawsuit, which has 18 pages, accused Coinbase Inc., GDAX, Brian Armstrong and David Farmer of tipping its employees a month before the official launch of the cryptocurrency on the platform. In the lawsuit, Berk complains that customers who purchased the BCH coins during launch had suffered monetary losses because company employees were tipped off before them.

The lawsuit explains that the employees were tipped off before the general public, who only knew about the sale in December 19, 2017, the day which the sale was publicly announced and started at this same day. It also states that the people who had been tipped off started to place buy and sell orders moments after the launch which decreased the liquidity of the tokens and gave them an advantage.

This advantage made the price go up for non-insider traders, which only knew about the sale when BCH was being sold online on Coinbase. The document states that the people who were not tipped off did not have the chance to invest because after the insiders sold their BCH, the platform stopped the exchange of BCH for a whole day until it would open it again.

This way the insiders not only had privileged information about the launch but the company did, in fact, close the sale soon after the insiders bought their currencies, to help them.

Coinbase’s Stance on the BCH Insider Trading Claim

Coinbase responded to the accusations via its San Francisco firm. In a post which went online on December 19, Brian Armstrong, founder of the company, stated that the company already had its own internal policies in place well before the Bitcoin Cash tokens were launched and that all employees had been forbidden of giving information to outsiders and to trade the tokens themselves.

This information, the founder of Coinbase states, was communicated multiple times to the employees via a number of channels, so they would be breaking the company’s laws if they traded the coin on launch. The company also promised to investigate the matters directly and to fire any employee violating the policies of the company and take legal action against this employee.

Follow our blog to know how the case of Berk-vs-Coinbase develops further.

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