{"id":795,"date":"2022-05-09T02:18:29","date_gmt":"2022-05-09T02:18:29","guid":{"rendered":"https:\/\/grandpascrypto.com\/?p=795"},"modified":"2022-05-09T02:18:31","modified_gmt":"2022-05-09T02:18:31","slug":"coinbases-insider-trading-scandal","status":"publish","type":"post","link":"https:\/\/grandpascrypto.com\/coinbases-insider-trading-scandal\/","title":{"rendered":"Coinbase\u2019s Insider Trading Scandal"},"content":{"rendered":"\n<p><strong><em>tl;dr Summary<\/em><\/strong><em>: Coinbase, a leading crypto exchange in the US, has been accused by Cobie, a prominent crypto influencer, of insider trading in regards to a newly released list of assets the exchange plans to list.<\/em><\/p>\n\n\n\n<p>Coinbase, the go-to crypto exchange for US citizens, has been accused of another insider trading scandal spreading mistrust on the policies of the exchange. Coinbase is known to list coins or tokens with high merits which include an audited and rigorously tested code, strong documentation about the project and a high degree of decentralization.&nbsp;<\/p>\n\n\n\n<p>Coinbase was founded in 2012 by Brian Armstrong and Fred Ehrsam. It is known to be the largest crypto exchange by trading volume in the US. The distinguishing features of the exchange are its user-friendliness, regulatory clarity and high liquidity. However, the recent accusation suggests that the app is involved in untrustworthy and illegal actions, which has caused some users to express concern in the motives of the app creators.&nbsp;<\/p>\n\n\n\n<figure class=\"wp-block-embed is-type-rich is-provider-twitter wp-block-embed-twitter\"><div class=\"wp-block-embed__wrapper\">\n<blockquote class=\"twitter-tweet\" data-width=\"550\" data-dnt=\"true\"><p lang=\"en\" dir=\"ltr\">Coinbase is in their flop era \ud83d\udc4e\ud83d\udc4e\ud83d\udc4e <a href=\"https:\/\/t.co\/4T6SFehSFG\">pic.twitter.com\/4T6SFehSFG<\/a><\/p>&mdash; 12 year old with a credit card (@12yearoldwithcc) <a href=\"https:\/\/twitter.com\/12yearoldwithcc\/status\/1513627642322321409?ref_src=twsrc%5Etfw\">April 11, 2022<\/a><\/blockquote><script async src=\"https:\/\/platform.twitter.com\/widgets.js\" charset=\"utf-8\"><\/script>\n<\/div><\/figure>\n\n\n\n<p>Insider trading is basically the unfair disclosure of information to specific individuals regarding specific assets before that information is revealed publicly. This gives those traders a first-move advantage by purchasing the assets for a lower price before the news is public, and flipping the assets for a profit after the news becomes public. It is an unethical practice common in traditional markets as well.<\/p>\n\n\n\n<p>This isn\u2019t the first scam Coinbase has been <a href=\"https:\/\/www.investopedia.com\/news\/coinbase-hit-2-class-action-lawsuits-accused-insider-bitcoin-cash-trading\/\">accused <\/a>of. One such lawsuit was filed against Coinbase in 2018 which claimed that Coinbase employees benefited from insider information before Bitcoin Cash (BCH) was listed on the exchange. BCH traded at much higher prices after it was listed and the employees who purchased BCH ahead of time were able to sell it for a profit.&nbsp;<\/p>\n\n\n\n<p>Another such lawsuit was filed on the next day concerning Coinbase\u2019s unfair business practices. It was alleged that Coinbase tried to claim cryptocurrency that did not belong to it, but instead to its users.&nbsp;<\/p>\n\n\n\n<p><strong>The Coinbase Effect<\/strong><\/p>\n\n\n\n<p>But why is a Coinbase listing so important? This can be explained by the Coinbase effect. Whenever it is announced that an asset will be listed on Coinbase, it automatically creates a <a href=\"https:\/\/www.fxstreet.com\/cryptocurrencies\/news\/here-is-how-the-so-called-coinbase-effect-will-pump-any-new-cryptocurrency-listed-202101290435\">price rally<\/a>. This is due to the increased liquidity a Coinbase listing provides. Higher amounts of liquidity makes the coin or token easy to be bought or sold and increases growth potential. For example, consider a jug of water and a whole river to drink water from. The river has \u2018high liquidity\u2019 as hundreds of people would drink from it without significantly disturbing the water level. The jug on the other hand would not be enough to fulfill the demand of all the thirsty people. Hence listing an asset on Coinbase allows more buying and selling as it is now easily available.<\/p>\n\n\n\n<p>Many investors that use Coinbase tend not to do their own research into an asset, only taking for granted that it is on Coinbase so thus must be a safe investment. Additionally, new listings translate into a large amount of retail interest and fear of missing out (FOMO) into the newly listed asset. Thus, the asset is likely to give double digit gains prior to the listing from all the hype developed.&nbsp;<\/p>\n\n\n\n<p><strong>Present allegations on the exchange<\/strong><\/p>\n\n\n\n<p>Considering such an effect Coinbase has on the price of an asset, it is essential that Coinbase conducts its due diligence in the listing of assets. However, the present allegation against the exchange points towards the contrary. The accusation is is regarding a list that Coinbase released <a href=\"https:\/\/blog.coinbase.com\/increasing-transparency-for-new-asset-listings-on-coinbase-e06f2edb095e\">of 50 cryptocurrencies<\/a> on its Medium blogpost that it was considering listing in Q2 of 2022. The most notable assets were Morpheus Labs (<a href=\"https:\/\/www.tradingview.com\/symbols\/MITXUSDT\/\">MITX<\/a>), Big Data Protocol (<a href=\"https:\/\/www.tradingview.com\/symbols\/BDPUSDT\/\">BDP<\/a>), and Kromatika Finance (<a href=\"https:\/\/www.coingecko.com\/en\/coins\/kromatika\">KROM<\/a>). These assets skyrocketed 185%, 145%, and 204% respectively prior to the listing. <a href=\"https:\/\/twitter.com\/cobie?ref_src=twsrc%5Etfw%7Ctwcamp%5Etweetembed%7Ctwterm%5E1513874972552355846%7Ctwgr%5E%7Ctwcon%5Es1_&amp;ref_url=https%3A%2F%2Fcointelegraph.com%2Fnews%2Fcoinbase-ceo-responds-to-insider-trading-allegations-with-changes-for-token-listings\">Cobie<\/a>, a cryptocurrency influencer, was quick to confirm that a specific Ethereum wallet had bought thousands of dollars\u2019 worth of the assets 24 hours before Coinbase disclosed them to the public.&nbsp;<\/p>\n\n\n\n<figure class=\"wp-block-embed is-type-rich is-provider-twitter wp-block-embed-twitter\"><div class=\"wp-block-embed__wrapper\">\n<blockquote class=\"twitter-tweet\" data-width=\"550\" data-dnt=\"true\"><p lang=\"en\" dir=\"ltr\">Found an ETH address that bought hundreds of thousands of dollars of tokens exclusively featured in the Coinbase Asset Listing post about 24 hours before it was published, rofl <a href=\"https:\/\/t.co\/5QlVTjl0Jp\">pic.twitter.com\/5QlVTjl0Jp<\/a><\/p>&mdash; Cobie (@cobie) <a href=\"https:\/\/twitter.com\/cobie\/status\/1513874972552355846?ref_src=twsrc%5Etfw\">April 12, 2022<\/a><\/blockquote><script async src=\"https:\/\/platform.twitter.com\/widgets.js\" charset=\"utf-8\"><\/script>\n<\/div><\/figure>\n\n\n\n<p>The assets were soon to retrace back almost halfway from their highs after the listing which confirms that the traders dumped the tokens on the retail investors, selling the tokens for a high price and leaving them deflated for all the other buyers. Such a sequence of events points towards what is called a \u2018pump and dump\u2019 scam. The fact remains standing that someone got the information before it was publicly available on Medium. Coinbase responded to Cobie\u2019s accusation through a blog post on Medium, reassuring further investigation on the matter.<\/p>\n\n\n\n<p><strong>Coinbase\u2019s Response to the Allegations<\/strong><\/p>\n\n\n\n<p>Coinbase CEO Brian Armstrong <a href=\"https:\/\/blog.coinbase.com\/an-update-on-our-asset-listing-processes-e74421da21cc\">responded <\/a>to the claims of the public by stating that Coinbase would change its policy to list assets such that they would not publicize the listing and do it silently. He explained that there are two ways in which traders benefit from a listing. One would be through on-chain activity; as the data of blockchains is available publicly, anyone can see the transactions of a particular token. Now, obviously tokens of a new project must be transferred to Coinbase in large sums, and testing of transactions must be done by Coinbase. These transactions can be noticed by experienced traders. The other possibility is leaked information from an insider. Armstrong reiterated that people committing such practices would be \u201cterminated and referred to relevant authorities.\u201d<\/p>\n\n\n\n<p>The policies introduced by Coinbase include not publicly advertising the listing before it is available on the exchange, tagging an asset\u2019s risk level, a system of ratings and reviews on the project and improving employee screening techniques to prevent such ill practices.<\/p>\n\n\n\n<p><strong>Conclusion&nbsp;<\/strong><\/p>\n\n\n\n<p>Coinbase is looked upon as a reputable organization for the exchange of cryptocurrencies. The services it provides are ideal for newcomers in the space. Many new crypto projects will rise and be the de factos of the new generation. The measures by Coinbase aim to remove disparities among the investors and make information available to all in symmetry. The effect Coinbase has is crucial for new projects to go mainstream so its integrity to be preserved is necessary.<\/p>\n","protected":false},"excerpt":{"rendered":"<p>tl;dr Summary: Coinbase, a leading crypto exchange in the US, has been accused by Cobie, a prominent crypto influencer, of insider trading in regards to a newly released list of assets the exchange plans to list.<\/p>\n","protected":false},"author":2,"featured_media":788,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[54,59],"tags":[1143,1137,430,1135,136,1133,1142,1138,1136,1134,1139,1141,1140],"yoast_head":"<!-- This site is optimized with the Yoast SEO plugin v18.1 - https:\/\/yoast.com\/wordpress\/plugins\/seo\/ -->\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" href=\"https:\/\/grandpascrypto.com\/coinbases-insider-trading-scandal\/\" \/>\n<meta property=\"og:locale\" content=\"en_US\" \/>\n<meta property=\"og:type\" content=\"article\" \/>\n<meta property=\"og:title\" content=\"Coinbase\u2019s Insider Trading Scandal - 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