Bitcoin cash deals frozen as Coinbase investigates possible insider trading

20 Dec 2017

Bitcoin cash prices rose at a rate some viewed as suspicious. Image: Madrolly/Shutterstock

As the bitcoin offshoot soars, cryptocurrency start-up Coinbase is commencing an internal investigation.

Yesterday (19 December), San Francisco-based firm Coinbase allowed its users to receive, buy and sell bitcoin cash, an offshoot of bitcoin that was created by a fork in August of this year.

Bitcoin cash works faster than traditional bitcoin in terms of transaction speeds, and costs are lower.

Coinbase is one of the US’s largest digital currency exchanges, and it has recently been landed in hot water as market-watchers accuse it of illegal activity via social media.

Bitcoin cash activity raises questions

The price of bitcoin cash rose rapidly, likely due to the announcement from Coinbase that it would allow it to be traded on its GDAX exchange.

Just two minutes after trading began, GDAX had prevented orders from being filled and the market was taken offline completely a little over an hour later. Coinbase said trading will resume later today.

Traders originally grew suspicious when the bitcoin cash value took a sharp upturn in the hours leading up to the company’s announcement, with many suspecting that individuals with insider knowledge of the event procured bitcoin cash at a low rate prior to the launch.

Coinbase CEO issues firm response

Coinbase stated: “Coinbase maintains a strict trading policy and internal guidelines for employees. Coinbase employees have been prohibited from trading in bitcoin cash for several weeks.”

CEO of Coinbase, Brian Armstrong, addressed the issue in a blogpost: “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.

“Our goal is to make Coinbase the most trusted and easiest to use digital currency exchange. We will only accomplish this goal by ensuring that we (the employees and contractors at Coinbase) all hold ourselves to a high standard of conduct.”

Armstrong also emphasised that he had told Coinbase employees through several channels that they were prohibited from trading bitcoin cash in the weeks leading up to its launch on GDAX.

At the time of writing, bitcoin cash is the third most popular cryptocurrency in the world, with ethereum in second place and bitcoin remaining at number one.

Ellen Tannam was a journalist with Silicon Republic, covering all manner of business and tech subjects