The cryptocurrency world was taken by pleasant surprise on Tuesday evening when Coinbase, one of the largest cryptocurrency exchanges in the world, announced that it would be providing full support for Bitcoin Cash, a crypto payment network that was created in an August 2017 fork of the Bitcoin blockchain. By this announcement, traders within the Coinbase network can now send and receive Bitcoin Cash, with the additional functionality of trading of Bitcoin Cash to be added shortly.
Bitcoin Cash soared more than 30 percent on the news, closing at $3,800 per BCH. Prices climbed as high as $8,500 on GDAX, a cryptocurrency exchange operated by Coinbase before trading was halted. Bitcoin Cash prices apparently did not spike that much on other platforms. As at the time of writing, Bitcoin Cash was hovering at $3,213 per BCH.
However, even as traders and market watchers are getting excited by this new development and what opportunities it could open up, Coinbase is already trying to shake off a brewing scandal that has resulted from this announcement. Rumors are circulating among the small-block community that some Coinbase employees had exploited information about this development to set up trades on BCH before the information became public knowledge: insider trading as it were. These rumours are citing the explosive surge and much higher trading volumes seen on GDAX following the announcement. The company is now investigating to see if any employees utilized this inside knowledge to benefit from this launch.
Coinbase CEO Brian Armstrong has confirmed in a statement on the Coinbase blog, that investigation around the price spike has commenced.
“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 was quoted as saying in a statement made available to Medium.
According to Armstrong, a memo had been put out several weeks before the launch which prohibited all Coinbase staff, their family and friends from trading BCH for the past month as plans were being worked out to list BCH on its exchange. This, he said, was in keeping with the same policy the company has used over ‘inside info,’ that guided its launch of Ether and Litecoin in 2016 and 2017 respectively.
“We’ve had a trading policy in place for some time at Coinbase. The policy prohibits employees and contractors from trading on “material non-public information”, such as when a new asset will be added to our platform. In addition to trading restrictions, it prohibits communication of material non-public information outside the company. This includes to friends and family,” he explained.
It remains to be seen how the investigation ends and what implications it will have on Bitcoin Cash going forward.