Judge Dismisses Bitcoin Cash Insider Trading Case Against Coinbase
It looks like the popular cryptocurrency exchange Coinbase has escaped a lawsuit that was filed against them — for now. This week a federal judge in California granted the company’s motion to dismiss a case that accused them of insider trading related to the launch of Bitcoin Cash. As CCN reports, the ruling amounts to mostly good news for Coinbase, although the fight might not yet be over.
The suit against Coinbase was filed by Arizona resident Jeffrey Berk in March and alleged that Coinbase employees had acted on insider knowledge to the detriment of customers. In a quote obtained from the suit by CoinTelegraph, Berk stated, “On December 19, 2017, a month after tipping off its own employees as to when it would commence fully supporting BCH, Coinbase suddenly announced that it was opening up its books to the buying and selling of BCH within minutes after its announcements. Unsurprisingly, those who had been tipped off, immediately swamped Coinbase and the GDAX with buy and sell orders, thinning the liquidity but obtaining BCH at fair prices.” He went on to declare that Coinbase’s actions artificially increased the prices of Bitcoin Cash.
Sadly for Berk, Judge Vince Chhabria concluded that his suit lacked legal basis. In the decision, Chhabria wrote, “Taking Berk’s negligence claim as an example, Berk fails to describe the scope or content of Coinbase’s duty in anything more than broad generalities. A reader of the Complaint is thus left wondering what Coinbase should have done differently, or why the rollout of Bitcoin Cash would have gone more smoothly had Coinbase done whatever Berk thinks is appropriate.” However the judge did grant Berk 21 days to amend the complaint, meaning Coinbase isn’t exactly out of the woods just yet. Furthermore Chhabria also dismissed Coinbase’s motion that would have forced Berk into arbitration. As lawyer Stephen Palley tweeted, the ruling suggests that Coinbase’s arbitration clause doesn’t necessarily apply to market manipulation claims.
Although this might not be the end of the battle for Coinbase, the ruling does seem to be a win overall. At the same time the existence of the suit only brings more ammo to those who complain about a lack of regulation on the crypto market and are pushing for greater consumer protections. Because of this it seems unlikely that this will be the last time we hear of this matter nor will be the only time such a complaint might find itself in court (not just arbitration).