Coinbase taken to court, twice
Coinbase taken to court
San Francisco-based cryptocurrency exchange Coinbase has landed in more hot water with two federal class action lawsuits.
The first lawsuit, filed by Jeffrey Berk on behalf of himself and a number of other Coinbase customers, accuses the exchange’s employees of profiting illegally on insider information trading, namely regarding the planned roll-out of Bitcoin Cash (BCH) support at the end of last year.
According to the plaintiffs, “on 19 December 2017, a month after tipping off its own employees as to when it would commence fully supporting BCH, Coinbase suddenly announced that it was opening up its books to the buying and selling of BCH within minutes after its announcements.
“Unsurprisingly, those who had been tipped off, immediately swamped Coinbase and the GDAX with buy and sell orders, thinning the liquidity but obtaining BCH at fair prices. The market effect was to unfairly drive up the price of BCH for non-insider traders once BCH came online on the Coinbase exchange.”
The plaintiffs are asking for compensation for all Coinbase customers who placed purchase, sale or trade orders with the exchange on 19-21 December and “suffered monetary loss as a result of defendants’ wrongdoing”.
The second lawsuit, filed by Timothy G. Faasse and Jeffrey Hansen on behalf of a group of clients, accuses Coinbase of “unlawful and unfair business practices”. The plaintiffs say Coinbase knowingly kept the funds that didn’t belong to the exchange simply because users had not claimed them, thus violating California’s law regarding unclaimed property.
“Imagine writing a cashier’s cheque to a friend. The bank withdraws funds from your account, but your friend never cashes the cheque. Does the bank get to keep the funds? The law clearly says no. But this is exactly what has happened with cryptocurrencies sent through Coinbase.com, owned and operated by Coinbase Inc,” the plaintiffs say.
“Coinbase users can send Bitcoin, Ethereum, Litecoin and Bitcoin Cash (collectively ‘cryptocurrencies’) to an email address. Plaintiffs and the class were sent an email from Coinbase stating they had cryptocurrency, with a link to create a Coinbase account to redeem it. But until 2017, most people never heard of a Bitcoin or cryptocurrency, so most of these emails were disregarded. And most of the cryptocurrency went unclaimed.”
However, instead of notifying the recipients they had cryptocurrencies or turning those over to the state of California – as required by the state’s Unclaimed Property Law – Coinbase kept them to itself, the plaintiffs say.
Last month, Coinbase was found to be overcharging its customers by thousands of dollars due to a bug linked to how credit card companies bill for its service.
Shortly afterwards, it was ordered by the US Internal Revenue Service (IRS) to hand over data on 13,000 clients for tax purposes.
