Coinbase is investigating over unusual trading activity after launch of Bitcoin cash

Coinbase, one of the largest online exchanges for buying and selling cryptocurrencies, is investigating possible insider trading after the price of a Bitcoin offshoot called Bitcoin Cash climbed hours before Coinbase announced support.

Due to its stature in the industry, a cryptocurrency trading on Coinbase—as opposed to smaller exchanges—is seen as a stamp of legitimacy. When Coinbase announced unceremoniously on Tuesday that it would allow trading for Bitcoin Cash, a controversial clone of Bitcoin with some small differences, the digital currency’s value skyrocketed from just under $3,000 per coin to above $6,000. 

Coinbase said that employees at the venue have been "prohibited from trading in bitcoin cash for several weeks."

The firm's CEO Brian Armstrong then published a blogpost on the matter, and said Coinbase's trading policy prohibits staff from "trading on 'material non-public information,' such as when a new asset will be added to our platform." He said the company would conduct a probe into whether employees violated its trading policy.

"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."

Bitcoin cash was the result of a so-called "hard fork" — a split in the original network underpinning bitcoin — that occurred in August. Proponents of the virtual token believe it to be a more efficient means of peer-to-peer payments than bitcoin.

Coinbase issued the following statement in August pertaining to its involvement in bitcoin cash: “Over the last several days, we’ve examined all of the relevant issues and have decided to work on adding support for bitcoin cash for Coinbase customers. We made this decision based on factors such as the security of the network, customer demand, trading volumes, and regulatory considerations. We are planning to have support for bitcoin cash by January 1, 2018, assuming no additional risks emerge during that time.”

It is not entirely clear how this issue will be resolved, or what other forces may have contributed to bitcoin cash’s controversial surge. Investors should therefore plan for more volatility in the near future as Coinbase concludes its investigation.