An Arizona resident has filed a class action lawsuit against Coinbase accusing the company of insider trading and inflating the prices of Bitcoin Cash (BCH).
Coinbase is one of the most popular and accessible exchanges for the purchase, sale and use of Bitcoins, with more customers than Charles Schwab. By opening a Coinbase account, a person can obtain Bitcoins, and either buy and sell them or use them as currency with retailers and other businesses who accept Bitcoin as payments. Coinbase maintains a digital currency exchange known as the GDAX, which caters primarily to institutional and professional currency traders. Coinbase customers can set up what is known as a wallet, in which they keep their Bitcoins for later use or for investment.
Plaintiff Jeffrey Berk says he attempted to purchase BCH on December 19, 2017 at 5 p.m. PST within five minutes of Coinbase announcing that was going to support BCH. However, Berk’s orders were not executed until 1:06 p.m. December 20, at which time Berk learned that his order was executed and that he had purchased BCH at the inflated price of $4,200.98 per BCH- a price 100% greater than the price at the time he submitted his buy order.
BCH is created through what is known as a “hard fork”. A hard fork occurs when a cryptocurrency splits in two. In August 2017, Bitcoin experienced a hard form and BCH launched. At that time, anyone who held a Bitcoin was supposed to receive the equivalent numbers of BCHs.
However, in response to Bitcoin’s “hard fork”, Coinbase initially announced that it would not support the new BCH currency. In July 2017, it further told customers that if they intended to participate in the new BCH currency, they should withdraw their Bitcoins from Coinbase, resulting in a deluge of withdrawals.
Just weeks later on August 6, Coinbase abruptly changed course, and announced that it would allow current Coinbase customers at the time of the hard fork to withdraw their BCH but not until January 2018, but that it still would not support the currency.
According to the 18-page complaint, Coinbase once again suddenly changed course, stating it that it would as open access to Bitcoin cash on December 19, 2017 for trading. Within minutes of this announcement, BCH experienced a significant run up of its price and rumors began circulating that this was a result of insider trading.
In filing this class action lawsuit, Berk is seeking to hold Coinbase accountable for its seemingly conflicting statements about its support of BCH and its alleged misconduct in handling BCH.
“[Coinbase’s] conduct allowed Coinbase’s agents, employees and others, who were aware that Coinbase was going to support BCH in December 2017, to purchase BCH from other exchanges, and devise their strategy to either purchase or sell their BCH through Coinbase and on the GDAX, once Coinbase announced that it was going to support BCH,” the lawsuit states.
Berk seeks to represent a certified class of Coinbase customers who lost money after placing purchase, sale, or trade orders with Coinbase or the GDAX in connection with Coinbase’s launch of Bitcoin Cash from December 19, 2017 through December 21, 2017.
The Coinbase Inflated Bitcoin Cash Price class action lawsuit seeks an order of restitution and disgorgement requiring Coinbase to restore to them the additional benefits and monies that Defendant Coinbase received in connection with Class Members’ purchase, sales and trades of BCH.
The Coinbase Inflated Bitcoin Cash Price Class Action Lawsuit is Jeffrey Berk, et al. v. Coinbase Inc., et al., Case No. 3:18-cv-01364, in the U.S. District Court for the Northern District of California.