Coinbase, considered to be the largest cryptocurrency exchange, has been hit with two lawsuits that could be just the tip of the iceberg as the exchange continues to grow.
Coinbase is experiencing the growing pains of what most startups must contend with and that includes being the subject of much criticism and customer dissatisfaction.
The latest pain entails lawsuits, with two being filed in the same week over two completely different allegations. One was filed on March 1, while the other was filed on March 2.
In December, we told you about odd activity on the Bitcoin Cash markets that had caused Coinbase to suspect some insider information on the recent launch of BCH order books on GDAX. At one point, a price anomaly listed Bitcoin Cash at $9,500 on Coinbase, as some managed to sell much higher than current market prices.
Well, some believe there was absolutely some insider trading being done, and they have filed a class action lawsuit. Filed Thursday, March 1, the legal action accuses Coinbase of allowing its employees to trade cryptos based on information not known to the public.
Specifically, the lawsuit claims insiders benefited from knowing about Coinbase’s plans to support Bitcoin Cash transactions before that information was released to the public.
According to the lawsuit, around Aug. 6, 2017, Coinbase “abruptly” changed course, and announced that it would allow current Coinbase customers at the time of the hard fork to withdraw their Bitcoin Cash, but they’d have to wait until January of this year.
The lawsuit states that in December, 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. This happened “within minutes after its announcements,” according to this lawsuit.
“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. The market effect was to unfairly drive up the price of BCH for non-insider traders once BCH came on line on the Coinbase exchange.”
Coinbase won’t give up the crypto
In the class action lawsuit filed on Friday, March 2, Coinbase is accused of violating California’s Unclaimed Property law and its Unfair Competition law.
The plaintiffs are taking particular issue with users of the Coinbase exchange having to set up accounts to redeem cryptos that were sent to them via their email addresses. They claim that they did not receive notice from Coinbase that it would hold the cryptos until the receiver opened an account on its exchange.
According to the filing:
“Defendant’s failure to notify Plaintiffs and the Class, and the State of California as appropriate, that Coinbase is holding Cryptocurrencies that belong to Plaintiffs and the Class, and failure to deliver such Cryptocurrencies to Plaintiffs and the Class, and the State of California as appropriate, constitute “unfair” business practices…”
The plaintiffs also believe that that they “have a property right in their Cryptocurrencies, and a right to delivery and possession of same.”
“By failing to notify Plaintiffs and the Class, and by failing to deliver Cryptocurrencies to Plaintiff and the Class as described herein, Coinbase has wrongfully dispossessed Plaintiffs and the Class of their Cryptocurrencies.”