Last year in December, Bitcoin Cash made an unexpected price run-up, increasing by about 25% in a matter of a few days. The increase set the stage for the unprompted listing of Bitcoin Cash of Coinbase on the 19th of December. Within a few hours from the announcement, rumors spread among community members that the two events were too closely correlated for comfort, and a lot of them claimed that the out-of-the-blue run-up anticipated the listing by a form of insider trading.
Coinbase has suspended trading soon after the listing hit GDAX, or better known now as CoinbasePro, which is the exchange arm of Coinbase, blaming liquidity issues and a deluge of orders which flooded its system. Trading has been reopened the next day.
No evidence of insider trading by the employees of Coinbase
After seven months, Coinbase has provided its answers to the skepticism. Initially reported by Fortune, two quite prominent U.S. law firms, which identities are undisclosed, concluded a multi-month internal investigation of Coinbase. They have found that there is no evidence of insider trading by the employees of the company.
One spokesperson from the company told Fortune that they would not wait to terminate an employee or contractor and take relevant legal action if evidence showed that their policies were violated. He said that they can report that the voluntary, independent internal investigation has come to a close, and they have determined to take no disciplinary action.
Back in December 2017, the CEO of Coinbase, named Brian Armstrong, quickly responded with a blog post in which he denounced training and elucidated that such practices are explicitly against the policies of the company, as community skepticism reached a fever pitch. He also made it a clear point to announce the fast and stern response of the company to the allegations with the recently concluded investigation.
Employees and contractors prohibited to trade Bitcoin Cash
According to the post, the company policy prohibits employees and contractors from trading on ‘material non-public information,’ as when a new asset is going to be added to their platform. Their launch of Bitcoin Cash is no exception to this. All of the employees and contractors in Coinbase were explicitly prohibited from trading Bitcoin Cash and from disclosing their launch plans over a month ago. Given the increase in the price in the hours leading up the announcement, they are going to be conduction an investigation into this matter. If they find some evidence of any employee or contractor violating their policies – directly or indirectly, they are not going to hesitate to terminate the employee immediately, as well as take appropriate legal action.
Originally, Coinbase conveyed that it had no some plans for supporting Bitcoin Cash when it launched in August 2017, much to the chagrin of those that kept BTC in their Coinbase wallet, at the time of the timestamp of the fork, since they could not retrieve their corresponding BCH.
Shortly after Bitcoin Cash launched on the 1st of August, 2017, Coinbase has published a blog post reassuring users that their forked coins were actually in the hands of the company. The post also went on to state that the platform is going to add withdrawal support by the 1st of January, 2018, even though it has mentioned nothing about adding trading support before this deadline.
According to the post, the company had some plans to have support for Bitcoin Cash by the 1st of January, 2018, assuming no additional risks emerge at that time. Once supported, customers are going to have the ability to withdraw Bitcoin Cash. The company is also going to make a determination at a later date about adding trading support. Meanwhile, customer Bitcoin Cash is going to remain safely stored on Coinbase.
The employees profited from the listing of Bitcoin Cash
The determination for listing trading support for Bitcoin Cash has never been publicly announced even though its unheralded listing came off as slipshod and unscrupulously spontaneous. Coinbase updated its new listing policy and shared its process by another, responding to criticism that mounted in the months that follow.
The results from the investigation are also likely to rebuild trust for some in a company which has arguably affected transparency measures only after-the-fact. Others may also find the airless cleared than it could be, as the investigation was internal, as well as the law firms which conducted it are still anonymous.