Coinbase Defends Against BCH Lawsuit From Users, Case Ongoing
Valeria Beasrow's original article for cointelegraph.com reduced by 50%
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. 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. 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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