Coinbase is investigating whether its employees took part in insider trading of Bitcoin Cash before the cryptocurrency was introduced to the exchange, according to company officials.
Four hours after its introduction to the exchange on Tuesday, Coinbase suspended trading of the digital currency.
A message from Coinbase CEO Brian Armstrong said the company’s ethics policy “prohibits employees and contractors from trading on ‘material non-public information,’ such as when a new asset will be added to our platform.”
Armstrong said in addition to trading restrictions, the policy prohibits communication of material non-public information outside the company, including to friends and family.
Hours before Coinbase added Bitcoin Cash to its exchange, Bitcoin Cash’s valuation spiked quickly as the price of the cryptocurrency doubled to more than $8,000 in one day.
“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.”
Buying or selling Bitcoin Cash remained disabled Wednesday morning on Coinbase but customers could transfer the cryptocurrency to other digital wallets.
The halt is the latest in a growing list of digital currency fiascos. On Tuesday, the U.S. Securities and Exchange Commission suspended trading of stock in The Crypto Company, a service provider linked to cryptocurrencies, including bitcoin.
The SEC cited concerns of “potentially manipulative transactions” of the company’s stock.
About a week earlier, SEC chairman Jay Clayton, issued a warning amid the rise of cryptocurrencies.
Clayton said “a number of concerns have been raised regarding the cryptocurrency and ICO markets, including that, as they are currently operating, there is substantially less investor protection than in our traditional securities markets, with correspondingly greater opportunities for fraud and manipulation.”
By Susan McFarland