Amended Suit Against Coinbase Details Bitcoin Cash Insider Trading Claims
A new amended class action complaint has been filed against Coinbase, providing more detail on how insiders allegedly profited from the cryptocurrency exchange’s rollout of bitcoin cash last December.
The document, filed Nov. 20 with the U.S. District Court for the Northern District of California, outlines why the plaintiffs believe Coinbase “made false and deceptive statements” about its rollout of the bitcoin fork; how the exchange allegedly caused bitcoin cash’s price to spike while simultaneously depressing bitcoin’s price; and how insiders who knew Coinbase would list bitcoin cash were able to allegedly buy and sell the token before other customers.
The complaint explained:
“As a consequence of this scheme, the Individual Defendants and Coinbase enabled Coinbase to earn significant fees from the trades of its customers, from which Coinbase earned a spread over an inflated price for BCH, and to avoid a ‘run’ on the Company by sellers anxious to take advantage of the inflated price, by closing down trading within minutes of the Launch to all except certain insiders who were positioned to and did sell BCH at inflated prices during the Launch.”
Tuesday’s filing comes just under a month after a federal judge initially dismissed plaintiff Jeffrey Berk’s original suit. At the time, Judge Vince Chhabria stated that it was unclear what Berk’s legal basis was, what he believed Coinbase should have done or how the rollout could have gone more smoothly.
As such, the amended complaint alleges that the rollout failed to abide by the token listing standards on GDAX (now Coinbase Pro). Further, while Coinbase said it would let investors know ahead of time when it would permit bitcoin cash withdrawals, it instead opened withdrawals without warning, the suit claims.
When bitcoin cash was listed, only purchase orders were permitted on the platform, causing the price to spike, the plaintiffs allege.
The plaintiffs are seeking damages and restitution, in an amount to be determined at trial, as well as the costs incurred during the course of the lawsuit.
The document concludes by demanding a jury trial on the issues laid out.
While the amended complaint was originally due within 21 days of the previous order – Nov. 13 – the plaintiffs and defendants agreed to an extension, allowing the plaintiffs to file the new document on Nov. 20.
Moving forward, Coinbase must provide a response by Dec. 20, and while both parties will have an opportunity to file another response each, a hearing has been scheduled for Jan. 31, 2019.
An attorney for the plaintiffs did not immediately respond to a request for comment.
Coinbase declined to comment.
Read the full amended complaint here:
Second Amended Class Action… by on Scribd
Coinbase CEO Brian Armstrong image via YouTube