Insider Trading Probe Launched After Bitcoin Cash Increases Suddenly


Armstrong notes that Coinbase has strict confidentiality policies and doesn't allow for insider trading. Many investors accused the exchange of insider trading that caused a major volatility swing, at the same time sending all other major cryptocurrencies crashing.

In a blog post on the company website, Armstrong voiced concerns that the price of Bitcoin Cash (BCH) on other exchanges increased in the hours before the Coinbase announcement. "Coinbase employees have been prohibited from trading in bitcoin cash for several weeks".

Bitcoin cash, a clone of bitcoin, jumped to $US8,500 ($A11,900) on Coinbase's exchange on Tuesday afternoon, hours before the San Francisco-based exchange launched trading in bitcoin cash. He also points out that this was stressed to employees in the month leading up to Bitcoin Cash's launch on the platform. On Tuesday night, bitcoin cash surged over $3,000, setting a new record high.

However, after going live for only four minutes (via its GDAX exchange), Coinbase halted trading of bitcoin cash. As noted by its co-founder and CEO, "Given the price increase in the hours leading up the announcement, we will be conducting an investigation into this matter".

When the Bitcoin "crash" happened earlier in the day, Gemini - the exchange which works with the CBOE on its futures trading - said that they couldn't process transactions due to problems on the blockchain related. From a cursory glance, it looked like someone knew about the Coinbase move in advance, triggered a flurry of trading that led to a spike in price, and took advantage of this for a massive windfall. But just minutes after opening, Coinbase suspended trades and eventually canceled orders.

"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", wrote CEO Brian Armstrong in a blog post Wednesday (20 December).

"We've had a trading policy in place for some time at Coinbase".