Coinbase to investigate bitcoin cash price rise, insider trading

David Paul Morris | Bloomberg | Getty Images

Brian Armstrong, co-founder and chief executive officer of Coinbase Inc.

Cryptocurrency exchange Coinbase is investigating a price increase in bitcoin offshoot bitcoin cash that happened hours before it said it would launch support for the new digital currency.

The price of the digital coin was seen rising sharply before Coinbase announced its support for the buying and selling of bitcoin cash on its platform.

It subsequently pulled the feature after prices were seen to fluctuate wildly compared to other exchanges, and said it would likely return on Wednesday. Coinbase said the bitcoin cash function was halted due to “significant volatility.”

Coinbase said that employees at the venue have been “prohibited from trading in bitcoin cash for several weeks.”

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The firm’s CEO Brian Armstrong then published a blogpost on the matter, and said Coinbase’s trading policy prohibits staff from “trading on ‘material non-public information,’ such as when a new asset will be added to our platform.”

He said the company would conduct a probe into whether employees violated its trading policy.

“Given the price increase in the hours leading up the announcement, we will be conducting an investigation into this matter,” Armstrong said.

“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.”

Bitcoin cash was the result of a so-called “hard fork” — a split in the original network underpinning bitcoin — that occurred in August. Proponents of the virtual token believe it to be a more efficient means of peer-to-peer payments than bitcoin.

The digital asset was trading at $3,431.21 at about 2:40 a.m. ET, according to Coinmarketcap data.