Coinbase is investigating whether its employees profited from insider knowledge of its plans to add support for Bitcoin Cash on its GDAX Exchange.
The company, which has become the number one app in the US app store on the back of frenzied trading in bitcoin, made a surprise announcement last night that it would begin trading in Bitcoin Cash - a fork of bitcoin - resulting in dizzying gyrations in the price of the cryptocurrency offshoot.
Just hours before the launch, Bitcoin Cash prices on other exchanges went through the roof, leading to accusations that Coinbase employees had been buying up the coins to trade for a profit when Coinbase waded in.
hey @coinbase , @GDAX and @brian_armstrong by being part of a product index for @CMEGroup you agreed to certain rules. Since bch news was clearly leaked around 2:30pm CST to certain parties. this qualifies as insider trading. Hope you enjoy the incoming complaints.— I am Nomad (@IamNomad) December 20, 2017
As Bitcoin Cash prices on the Coinbase exchange soared in value, the company moved to restrict orders before taking the whole service offline as liquidity dried up.
Coinbase CEO Brian Armstrong has acknowledged market concerns, writing on Medium: "I take the confidentiality of material non-public information very seriously as CEO. Given the price increase in the hours leading up the announcement, we will be conducting an investigation into this matter. If we find evidence of any employee or contractor violating our policies — directly or indirectly — I will not hesitate to terminate the employee immediately and take appropriate legal action."
He adds that all Coinbase employees and contractors were explicitly prohibited from trading Bitcoin Cash and from disclosing the firm's launch plans over a month ago.
"This was communicated multiple times via multiple channels to employees," he writes. "I view it as a key part of my job to set the tone from the top about how we all must act to ensure success. The trading restriction, which applies to all personal trading activity on any platform, remains in effect now."