Coinbase To Answer To Lawsuit From Bitcoin Cash Buyers

A California judge ruled that cryptocurrency exchange Coinbase has to deal with a negligence lawsuit from people who purchased bitcoin cash (BCH) following a listing that was allegedly fumbled on the exchange during the 2017 bull market, Coindesk reported on Wednesday (Aug. 7).

U.S. District Judge Vince Chhabria of the Northern District of California rebuffed Coinbase’s request for arbitration and would not dismiss buyers’ claims of negligence. The judge said it is “plausible” that Coinbase “breached its duty to maintain a functional market,” Coindesk reported.

“For starters, the fact that Coinbase halted trading within three minutes of the launch is indicative of dysfunction,” Chhabria wrote in the ruling Tuesday (Aug. 6).

Former Coinbase user Jeffrey Berk of Arizona launched the lawsuit, claiming insider trading Dec. 19-21, 2017. Prices for BCH soared just ahead of Coinbase announcing trading options on Dec. 20. Berk brought the case on behalf of other traders, although two earlier versions of his complaint were dismissed, according to Coindesk.

Chhabria threw out theories about insider trading, saying the plaintiff did not provide “causation.” Two law firms hired by Coinbase last year to probe insider trading found no wrongdoing.

Coinbase maintained it was their “duty” to project market swings, but the judge said it still has to prove it did everything possible to prevent any harm to users, the article said.

The judge’s order replied, “the interpretation that the California Supreme Court would be most likely to adopt — is that Coinbase indeed had a duty to maintain a functional marketplace.”

Coinbase “encouraged traders to enter the market,” by promoting the BCH launch, and held a “position of trust” when processing users’ transactions.

Sellers can refile if additional evidence is discovered.

In April, Coinbase closed its Chicago office and laid off 30 engineers after saying it opened the office too fast.

“We have made the difficult decision to consolidate the matching engine efforts and thus wind down the matching engine team in Chicago,” the company said. “We will look to relocate a small number of Chicago-based matching engine employees to San Francisco.”