Coinbase Faces New Bitcoin Cash-Related Insider Trading Lawsuit

San Francisco-based cryptocurrency exchange Coinbase is once again facing a class action lawsuit filed by traders, alleging there was insider trading ahead of its listing of Bitcoin Cash (BCH), the cryptocurrency created through a fork of the Bitcoin (BTC) network.

According to Finance Magnates, the lawsuit was filed against the firm in the US District Court for the Northern District of California, and sees the plaintiffs argue that the exchange “made false and deceptive statements” regarding the cryptocurrency’s listing.

Per the lawsuit, the plaintiffs allege Coinbase insiders were able to start buying BCH ahead of the listing, as they knew the cryptocurrency was going to be listed on the platform, and would go through what’s known as the “Coinbase effect” – the price rise a cryptoasset sees after being listed on the exchange.

The knowledge BCH would be listed, as such, allowed insiders to accumulate and rake in significant profits when the cryptocurrency was listed. Specifically, the plaintiffs claim the exchange allowed its insiders to open positions in the cryptocurrency, and only then opened the market to the public.

The crypto’s price was then inflated, and Coinbase then promptly shut down trading for the wider public, while still letting its insiders trade. At the time, according to CryptoCompare data, BCH saw a $9,500 high on Coinbase after its price started surging, and only went back to normal after trading was re-enabled.

Bitcoin Cash surged and plummeted after being listed on Coinbase

The price was inflated, the lawsuit implies, as Coinbase opened the market with only buy orders being available, meaning only its insiders were able to sell the cryptocurrency, at a premium.

This means some managed to sell their tokens at a high the cryptocurrency has never seen since then, even at the cryptocurrency market’s December highs. Bitcoin Cash’s current all-time high – across exchanges – was of about $4,100. At press time, it’s trading at about $256.

Coinbase can respond to the lawsuit’s allegations by December 20, and a hearing has been scheduled for January 31. The class action lawsuit comes shortly after another one, regarding the same listing process, was dismissed after a judge determined the plaintiff was unable to clarify how Coinbase could’ve done better.

As CryptoGlobe covered, Coinbase launched an investigation at the time, to determine whether any of its employees engaged in insider trading. The exchange claimed that the investigation “determined to take no disciplinary action” as it found no insider trading occurred.

Speaking to CNBC back then Roger Ver, a popular BCH-proponent, claimed he believes insider trading “is a non-crime” as trading in advance helps curb volatility and sees the price “much more closely reflect the price after the news became public.”

JPMorgan Pays $2.5 Million for Overcharging Cryptocurrency Fees

JPMorgan Chase has reportedly agreed to pay $2.5 million to settle a class-action lawsuit filed against the financial institution in 2018, over it allegedly overcharging customers who were buying cryptocurrencies with Chase credit cards.

According to Reuters, JPMorgan Chase was overcharging users for buying cryptocurrencies as these transactions were being classified as cash advances. As part of the deal, JP Morgan did not admit to any wrongdoing to the 62,000 members of the class-action lawsuit, but a motion filed in Manhattan federal court reads the financial institution agreed to pay customers $2.5 million, noting it will see class members get “about 95% of the fees they said they were unlawfully charged.”

It adds:

.Chase has agreed to enter into this Agreement to avoid the further expense, inconvenience, and distraction of burdensome and protracted litigation, and to be completely free of any further claims that were asserted or could have been asserted in the Action.

One of the plaintiffs, Brady Tucker, reportedly claimed JPMorgan Chase violated the Truth in Lending Act since it did not inform its customers crypto purchases were being treated as cash advances. This saw them pay higher fees, which the bank then refused to refund and led to the class action lawsuit.

At the time the lawsuit was filed JPMorgan was seemingly hostile toward cryptocurrencies, with its CEO Jamie Dimon claiming bitcoin was a “fraud.” Since then, the bank has launched its own stablecoin called JPM Coin.

As CryptoGlobe reported, a report published by JPM late last month showed that using their “intrinsic value calculation,” developed by in-house analyst Nick Panigirtzoglou, bitcoin is correctly valued after the recent halving event.

Featured image by Drew Beamer on Unsplash.