Thus far this month, Coinbase has been sued in two separate class action suits. However, the latest suit might be the most damaging. In it, Coinbase is accused of negligence during the rollout of Bitcoin Cash last year. It is claimed that the exchange tipped off its employees before it made the public announcement that it would support the coin. The amount the exchange is being sued for is over $5 million before costs and interest.
Details of the Suit
Jeffrey Berk of Arizona filed the suit in the US District Court for the Northern District of California. He filed the suit on behalf of himself and all others that were affected. The Grant Law Firm and Green & Noblin filed the suit.
The suit focuses on Coinbase / dba GDAX and its co-founder and CEO Brian Armstrong. Another person mentioned in the suit is David Farmer, who is the Director of Communications. It alleges that Armstrong was aware of the insider trading, and went so far as to promise an investigation. However, the results of the said investigation were never revealed.
This suit came about due to the Bitcoin hard fork that led to the creation of Bitcoin Cash. This new coin is designed to deal with most of the issues present in BTC such as slow rates of transactions. After the fork, Coinbase wobbled on its decision as to whether it would support the new coin or not. The result, as claimed in the suit is that it caused the plaintiffs “to suffer monetary loss as a result of the defendants’ wrongdoing”.
The lawsuit claims that since Coinbase has a monopoly on the purchase and sale of Bitcoin, the decision as to whether Coinbase will support a coin or not is important for people who want to purchase or sell digital currency.
The Rollout Saga
The period that is crucial to this case is December 19th to December 21st. During this time, Coinbase made a number of decisions that greatly affected the smooth rollout of BCH. Before this period, Coinbase had made other decisions and announcements that were confusing. For instance, in July 2017, the exchange said it would not support BCH.
When the exchange did this, it also advised those who owned BCH to withdraw them. A huge number of customers followed the advice and withdrew their BCH. In August, the exchange then said that it would partially support BCH.
However, the real problems began to arise in November. This was when Coinbase allegedly tipped off its employees that it would support BCH. The exchange then waited until December 19th before it made a public announcement of its decision. On December 20th, about USD $11 billion’s worth of BCH was traded.
There was even greater confusion as the exchange allegedly stopped and started BCH trading at will. The bottom line of the suit is that the plaintiffs, without insider knowledge, were forced to purchase BCH at an inflated cost.
What do you think about this lawsuit against Coinbase? Will it succeed? Leave us your thoughts in the comments section below.