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Claims of Insider Trading Surface After Bitcoin Cash Surges in Value

Coinbase Faces Accusations of Insider Trading

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Bitcoin Cash is shown to be trading at $9,500 on Coinbase. However, that may not be the complete picture. Things are more complicated though; it is thought that the price spiked because Coinbase announced it would begin trading BCH on GDAX. This led to claims that it was caused by insider trading.

How it all Began

After the prices spiked, trading was halted two minutes later, which prevented any more orders from being filed. An hour later, all orders were cleared, and the market went offline. GDAX said that trade would resume on December 20th.

BCH was trading on GDAX in post-only mode. This meant that traders would be restricted if the orders did not immediately match. However, about an hour of post-only order trading, GDAX removed the restriction. As the orders were matched, demand outgrew supply. This caused prices to spike. Two minutes later, restrictions were imposed.

Most traders were angry that BCH had shot upwards just hours before Coinbase made the announcement. This led to suggestions that people with knowledge of the listing had been hoarding cheap BCH coins.

What Coinbase Had to Say About it

When the accusations began to surface, Coinbase had no choice but to issue a statement. It said that all its employees had been barred from trading in BCH weeks prior to the listing. Brian Armstrong, the CEO, added that the company would carry out investigations into whether contractors had acted inappropriately and engaged in insider trading.

When it comes to manipulating the market, major companies such as Nasdaq have software that helps them detect fraudulent activity. The VP of GDAX, Adam White, said that all the systems used at GDAX are created in-house. He added that the firm had strict rules to prevent such practices. However, he did not clarify whether or not they had a system to monitor buying and selling.

Most exchanges, including Coinbase, have been struggling to keep the markets open as new traders pour in. This is because of the cryptocurrency market’s underdeveloped infrastructure. It is simply not built to withstand the hordes of retail traders and institutional players pouring in. If cryptocurrencies ever do become mainstream, this is a major problem that the exchanges will have to resolve.

Terminations Likely

Armstrong, the CEO of Coinbase, said that if investigations found any evidence of fraudulent activity, he would not hesitate to terminate their employment at the exchange. However, this creates a new problem of whether or not these employees can be charged under any existing laws. Depending on how it pans out, it could encourage or dissuade other employees from engaging in such malpractice in future.

Bitcoin Cash was created after the hard fork of Bitcoin in August 2017. Some people claim it is more efficient for peer-to-peer trading.

What do you think about the latest claims of insider trading? Is there any truth to them? Leave us a comment below.

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