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.”

Ethereum Was Behind 85% of Dapps' $12 Billion Volume in Q2 2020

The total transaction volumes of decentralized applications (dapps) in the cryptocurrency space hit $12 billion in the second quarter of this year, rising by $4.5 billion compared to the first quarter. Etheruem dapps accounted for 85% of the volume.

According to DappRadar’s Industry Review report, there are more than 70,000 active wallets across 13 different blockchains interacting with the cryptocurrency space. The top blockchains were EOS, TRON, and Ethereum, with the latter representing $10.2 billion of the $12 billion volume seen in Q2.

Ethereum’s large transaction volume was partly fuelled by Compound and the launch of the COMP token, which led to a “yield farming” trend, in which users were interacting with the protocol as much as possible to receive COMP tokens. Compound saw $1.2 billion move through it.

The yield farming trend saw Ethereum gas prices and transaction fees increase, which according to the report did not stop Ethereum dapps from thriving in general. It did, however, contribute to an 80% drop quarter-on-quarter for ETH gaming dapps, as high gas prices are “killing” their activities on the cryptocurrency’s network.

Despite Ethereum’s growth, EOS and TRON (TRX) dapps have also seen their activity increase in the second quarter of the year. According to the report in only three months, TRON’s transaction volumes on decentralized applications surged by over 17,200%.

The rise was largely attributed to Oikos.cash, a TRON-based version of the Compound lending protocol.  While TRON’s DeFi growth has been notably, DappRadar pointed out that most dapps on its blockchain are still in the “gambling” and “high risk” categories.

The EOS blockchain has still been enduring the effects of the EIDOS token airdrop, which put the network into “congestion mode.” The airdrop clogged the network and as a result, from 2019 to 2020 wallet activity on decentralized applications dropped 53%.

So far this year, $1.9 billion have been transacted on decentralized applications using the EOS blockchain, thanks to two dapps: Crypto Dynasty and Upland. DappRadar’s report also shows that two other blockchains are growing thanks to gambling dapps: WAX and ThunderCore.

Featured image via Pixabay.