Two Class Action Suits Filed Against Coinbase

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On March 1st and March 2nd, two separate class action lawsuits were filed against the California-based cryptocurrency exchange Coinbase.  And, even though these are not the first allegations to be targeted at the company, they may have the most dire consequences. The complaints were filed following the launch of Bitcoin Cash on the company’s exchange which took place on December 19th of 2017 and accused the company of insider trading and the illegal possession of intellectual property.

Rumors of Insider Trading

The first of the two lawsuits were filed by Jeffrey Berk, a citizen from Arizona, who accused the exchange and its employees of taking advantage of its clients between the morning of December 19th and December 21st, 2017 when Bitcoin Cash (BCH) was first made available on the exchange.

The complainant claims that Coinbase intentionally inflated prices on the initial offers of Bitcoin Cash (BCH) on December 19th. The result of this manipulation was a 130% increase which brought the price of BCH up to $4,300 from $1,865 just two days prior.

The Abuse of Property

The second lawsuit was filed by T. Faase, G. Hansen in association with any other person who found themselves in a similar situation. It is based on the poor management of assets transferred on Coinbase’s platform, specifically those issued from other cryptocurrency forks.

In essence, the complaint states that, unlike other virtual wallets, Coinbase allows its users the ability to transfer funds using a single e-mail address. In an e-mail, the company sent a link allowing the recipient to create a virtual wallet on their platform containing said funds. However, according to the complainants, not all funds were claimed by the recipients and Coinbase did not follow the current regulations of unclaimed property.

“Imagine writing a check to a friend. Then, the bank withdraws the funds from your account before your friend cashes the check. Is the bank allowed to keep the funds? The law clearly says no, but that’s exactly what happened with cryptocurrency sent via Coinbase.com…”

The law in California clearly states that funds not delivered or claimed by their recipient due to an out-of-date e-mail address must be left to the state to “prevent illicit enrichment.”

A Major Fork in the Road

The goal of the Faase and Hansen is to expose assets that are derived from forks or divergences in a cryptocurrency’s Blockchain.

Digital currency’s such as Bitcoin and Ethereum have given rise to other derivative cryptocurrencies such as Bitcoin Cash, Bitcoin Gold and Ethereum Classic. The newly created coins or tokens are made available to all portfolios which possessed the original cryptocurrency before the fork. In other words, if you possessed 100 Bitcoins before the divergence which took place on August 1st, 2017, you would be awarded 100 Bitcoin Cash for free.

As the host of virtual portfolios, Coinbase will have to explain their management of funds that were never claimed.

Look Too Hard and You Might Miss the Point

Since its inception in 2012, Coinbase has become a world leading cryptocurrency exchange with more than 13 million users.

Unfortunately, these two lawsuits come not long after the company falsely charged their clients transfer fees in February of 2018. If in this case Visa was able to recognize that the mistake was their own, we are left reasonably wondering about the company’s capability to deal with these other controversies.

Meanwhile, on February 23rd of this year, Coinbase informed 13,000 of its users that they had informed the US Internal Revenue Service about their personal information.

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