Lawsuits Against Coinbase Insider Trading & Stealing Customer Funds

coinbase insider trading allegation - Coinbase San Francisco has been hit with lawsuits, which may affect coinbase users.
By Achal Arya
Updated December 10, 2019
coinbase insider trading

Coinbase San Francisco has been hit with lawsuits that allege insider trading and unlawful business practices. This came just a few days after IRS’s demand for its 13,000 customers’ trading history.  

Also read: Is Coinbase Commerce Really a Good News for Bitcoin?

Advertisement
Advertisement

Lawsuit 1: Coinbase insider trading involvement 

The US exchange Coinbase is under some serious legal trouble. First, Coinbase has to deal with the attention of the Internal Revenue Service of US demanding the exchange to handover the trading histories of its customers. A few days back, Coinbase gave the records of its 13,000 clients to the authorities.

Now, the lawsuits have been filed on 1st and 2nd March that point out insider trading and unclaimed cryptocurrency funds.

Jeffrey Berk, the lead plaintiff in the lawsuit alleges:

“On December 19, 2017, a month after tipping off its own employees as to when it would commence fully supporting BCH, Coinbase suddenly announced that it was opening up its books to the buying and selling of BCH within minutes after its announcements.”

He further states in the next point that:

“Unsurprisingly, those who had been tipped off, immediately swamped Coinbase and the GDAX with buying and sell orders, thinning the liquidity but obtaining BCH at fair prices. The market effect was to unfairly drive up the price of BCH for non-insider traders once BCH came on line on the Coinbase exchange.”

Coinbase did its own investigation into the allegations of insider trading as well when the bitcoin price doubled on Coinbase as compared to other exchanges. However, it has not revealed if the investigation is finished or if any action has been taken against any of the employees. Now, the lawsuit is asking for a jury trial to resolve the matter.

Lawsuit 2: Unlawful Business Practices

The second complaint is filed by Jeffrey Hansen and Timothy G Faasse that further says “individually and on behalf of all other similarly situated” accuses Coinbase of unfair and unlawful business practices.

It is claimed by the plaintiff that Coinbase stealing money that is unclaimed cryptocurrency that is referred as being similar to a situation where someone writes a cashier’s check to a payee who doesn’t cash it. Thus the bank decides to keep the funds.

The plaintiff states that:

“Coinbase users can send Bitcoin, Ethereum, Litecoin and Bitcoin Cash (collectively “Cryptocurrencies”) to an email address. Plaintiffs and the Class were sent an email from Coinbase stating they had Cryptocurrency, with a link to create a Coinbase account to redeem it. But until 2017, most people never heard of a “bitcoin” or cryptocurrency, so most of these emails were disregarded. And most of the Cryptocurrency went unclaimed.”

In the next point, he further illustrated:

“But instead of notifying Plaintiffs and the Class they had unclaimed Cryptocurrencies or turning those Cryptocurrencies over to the State of California as required by California’s Unclaimed Property Law…Coinbase kept them.”

Now, they are basically asking for a solution where the exchange should return the cryptocurrencies to their intended recipients.

What are your views on Coinbase getting hit with lawsuits? How do you think it will affect its credibility and market value? Let us know below!

Advertisement
Achal Arya
Achal Arya is a digital product designer and an entrepreneur. He did his masters degree in design from IIT Hyderabad and has a bachelors degree in Computer Science. He works in the Web3 domain and manages new developments at CoinGape. Follow him on X at @arya_achal or reach him at achal[at]coingape.com.
Why trust CoinGape: CoinGape has covered the cryptocurrency industry since 2017, aiming to provide informative insights to our readers. Our journalists and analysts bring years of experience in market analysis and blockchain technology to ensure factual accuracy and balanced reporting. By following our Editorial Policy, our writers verify every source, fact-check each story, rely on reputable sources, and attribute quotes and media correctly. We also follow a rigorous Review Methodology when evaluating exchanges and tools. From emerging blockchain projects and coin launches to industry events and technical developments, we cover all facets of the digital asset space with unwavering commitment to timely, relevant information.
Investment disclaimer: The content reflects the author’s personal views and current market conditions. Please conduct your own research before investing in cryptocurrencies, as neither the author nor the publication is responsible for any financial losses.
Ad Disclosure: This site may feature sponsored content and affiliate links. All advertisements are clearly labeled, and ad partners have no influence over our editorial content.