Coinbase Defends Against BCH Lawsuit From Users, Case Ongoing

gepubliceerd op by Cointele | gepubliceerd op

On March 1, 2018, an Arizona citizen and trader named Jeffrey Berk filed a lawsuit in the Northern District Court of California on behalf of exchange users who found themselves in a similar situation, accusing Coinbase of sharing misleading information and - most importantly - insider trading, both of which allegedly resulted in mass losses of funds.

At the end of July 2017, right before the hard fork, Coinbase declared that it would not support the new coin - i.e., Bitcoin Cash - since it was hard to predict for how long it would survive and what its market value would be in the future.

Coinbase made several confusing statements about adding Bitcoin Cash to its platform, which eventually led the company to court.

Following the declared policy toward the hard fork, Coinbase advised its users to withdraw their Bitcoin from the exchange before the split if they wanted to trade BCH because withdrawals would not be possible after the hard fork.

The reason for this was that, "In order to safely and securely access bitcoin cash, Coinbase would need to undertake a process of designing and testing significant changes to our systems - including hot and cold storage," according to a now-delete tweet from Coinbase that was quoted in the lawsuit.

Soon after the hard fork, Coinbase's director of communications, David Farmer, wrote in a blog post that Coinbase would eventually add BCH, as it had considered customer demand, the network's security and other factors - but again, not until Jan. 1, 2018.

Coinbase changed the schedule and decided to add the currency on Dec. 19, but the exchange failed to give its customers any advanced notice, while employees were informed that the currency would be added to the exchange earlier than planned, according to the lawsuit.

In a blog post, CEO of Coinbase Brian Armstrong stressed that "All Coinbase employees and contractors were explicitly prohibited from trading Bitcoin Cash" and also that the disclosure of nonpublic information was not allowed.

"The complaint does not sufficiently explain how the launch manipulated the market for Bitcoin Cash or for Bitcoin. Nor does it plausibly or coherently describe Coinbase and Armstrong's motive to manipulate the prices."

Liquidity and market capitalization needed for effective trading might have been ensured if Coinbase announced the BCH launch an hour in advance.

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