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Coinbase halts Bitcoin Cash transactions over insider trading fears

Staff may have used secret info to profit from the currency's launch.
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NurPhoto via Getty Images

The start of Bitcoin Cash trading on the Coinbase exchange was supposed to be a great opportunity to get into a major new cryptocurrency while its values weren't yet through the roof, but that's... not how it panned out. Coinbase froze transactions just a few hours after they began in order to investigate numerous accusations of insider trading. Observers noticed that the price of Bitcoin Cash rose sharply before news of its availability on the exchange broke, and that there was a sharp selloff virtually the moment trading started. From a cursory glance, it looked like someone knew about the Coinbase move in advance, triggered a flurry of trading that led to a spike in price, and took advantage of this for a massive windfall.

Coinbase chief Brian Armstrong stressed in a blog post that there was no evidence of insider trading "at this time," but also promised a zero-tolerance approach. The CEO said "will not hesitate" to immediately fire anyone shown to be trading on non-public info, and insisted that the company had repeatedly warned employees against the practice. Staff are barred from any trading for "several weeks."

It's not certain when Bitcoin Cash transactions will return to the exchange. Whenever they do, the unusual activity is a reminder that digital currency is still a relatively untamed space. Even with futures trading and tighter regulation in place to add some stability, virtual money still tends to be volatile -- it doesn't take much to create havoc.

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