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Coinbase Charged With BCH Insider Trading but Gets Away With It

August 8, 2019
Ross Peili


Coinbase Charged With BCH Insider Trading but Gets Away With It

US District Judge Vince Chhabria issued a statement targeting Coinbase, one of the most prolific cryptocurrency brokers around, which was charged with negligence, fraud and insider trading for its position during the infamous launch of Bitcoin Cash, back in 2017’s major pump

The move brought by Coinbase user and trader Jeffery Berk regarding the events, which occurred in December 2017, when Coinbase allegedly canceled US dollar orders of BCH hours before the digital asset was to enter its platform. 

Coinbase may not ring a bell to newcomers in the scene, but it used to be one of the few, if not the only, cryptocurrency broker that allowed you to securely purchase crypto using your debit or credit card, and for a decent fee.

The crypto broker also has its own trading platform called GDAX, where trading Coinbase assets would not require any additional fees for each trade.

Prior to the BCH addition, Coinbase was supporting only Bitcoin (BTC), Ethereum (ETH), and Litecoin (LTC) purchases, making it look like a “Serious” cryptocurrency exchange market that is very strict when it comes to new additions. 

Therefore when Coinbase announced the addition of Bitcoin Cash (BCH) everyone was hyped about it and were convinced that is is gonna be a big deal, and BCH will be promoted to millions of users that use Coinbase’s platform worldwide. 

The thing is that, while Coinbase uploaded the logo and details of BCH, its chart, tailored wallets, and everything regarding this new exciting addition, people could not buy it, at least not for a couple hours, which were apparently more than enough for a huge pump  to occur due to FOMO generated by what some refer to as ‘insider trading’.

The Coinbase effect

There is a term we’re using today called the “Coinbase effect“, which is practically Coinbase listing a new cryptocurrency, and the results are almost always bullish for the respective crypto, as happened with BCH during the winter of 2017. 

Prior to BCH’s listing on Coinbase, BCH’s price per unit was rising slowly but exponentially, many said led by insider trading participants, that had to be Coinbase personnel, and affiliates, such as Litecoin’s Charlie Lee, or Bitcoin Cash’s Roger Ver, as they were the only ones who knew which coin is going to be listed next. 

Indeed, the price was reaching a new all-time high hour after hour, and when the listing appeared on Coinbase, people were really feeling the FOMO in their gut, helping the price reach $4,000 USD per BCH piece by December 20th, 2017. 

Like with any other pump, Bitcoin Cash eventually had to make some investors “rich”, who most likely are the ones who invested first, getting us back to the point of insider trading. 

Charlie Lee, the head of Litecoin, who was already part of the Coinbase arsenal by then, liquidated almost all of his Litecoin (LTC) assets for unknown reasons, that were later made clear for some supporters of the Coinbase insider trading incident. 


In the end, the court’s order said that Coinbase “renewed motion to compel arbitration is denied. The Court’s prior order explains why the arbitration agreement does not clearly and unmistakably delegate the question of arbitrability to the arbitrator.”

In addition, the court said that the claims against Coinbase were brought by the ones who sold BCH and not people who wanted to purchase BCH but was unable to. 

In general, it seems that Coinbase is getting away with this one, as it only followed its protocol in order to maintain a functioning market, by seizing purchases on a “volatile period”.

The thing is that back then nobody would expect judges and governments to get involved with how and why cryptos work, so it was easy to organize arbitrary opportunities, insider tradings and other unregulated practices aiming for short-term wealth generation. 

Obviously, people who made money back then are not afraid of facing the law, which on the worst-case scenario will slap them with a fine they can now more than just afford.