Coinbase suspects that some of its employees may have illegally tried to make a quick buck off its launch of bitcoin cash (BCH) on the platform.
The company, one of the largest virtual currency trading platforms, announced on Tuesday evening that it would allow users to start buying and selling BCH. Within hours, the spin-off cryptocurrency of bitcoin surged to a high of $8,500 on Coinbase’s GDAX platform, nearly three times higher than the $3,500 price being quoted on other exchanges. Shortly after, BCH trading was suspended on GDAX, due to “significant volatility” and signs of foul play.
In a blog post published early Wednesday morning, CEO Brian Armstrong said the price of BCH on other exchanges began increasing hours before his company made its announcement, indicating that employees who knew about the launch engaged in insider trading. Armstrong added that Coinbase is currently looking into the matter. (See also: Coinbase Has More Users Than Schwab.)
“Given the price increase in the hours leading up the announcement, we will be conducting an investigation into this matter," he 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."
In the blog post, Armstrong explained that Coinbase staff, together with their family and friends, had been forbidden from trading BCH for the past month as the company prepared to make the coin available on its own exchange. He added that a similar policy was also adopted before the San Francisco-based firm began supporting Ether and Litecoin. (See also: Coinbase Suffers Outage as Litecoin and Ethereum Trading Heats Up.)
“We’ve had a trading policy in place for some time at Coinbase,” Armstrong said. “The policy prohibits employees and contractors from trading on ‘material non-public information’, such as when a new asset will be added to our platform. In addition to trading restrictions, it prohibits communication of material non-public information outside the company. This includes to friends and family.”
Coinbase aims to make BCH available to buy and sell again on Wednesday.