Insider trading was Common at Coinbase Exchange, a New Study Argues

Insider trading was Common at Coinbase Exchange, a New Study Argues

 

A new academic study found out that insider trading was a bigger problem than previously imagined at cryptocurrency exchange platform Coinbase Exchange (COIN), suggesting market regulators seeking to police trading may have more work forward of them.

 

Researchers at the University of Technology of Sydney forecast that insider trading, or token front-running, occurred on 10% to 25% of new Cryptocurrency listings at Coinbase Exchange between September 2018 and May 2022, generating at least $1.5 million in overall gains for individuals behind the transactions.

 

 

A crypto giant such as Coinbase exchange listing a Cryptocurrency can give cachet and dramatically boost liquidity for a coin, causing its value to rise. Someone could – illegally and unethically – gain from that by buying a cryptocurrency before its listing is made public.

 

Also Read: Coinbase Exchange Faces SEC Investigation Over Its Crypto Listings

 

And, certainly, there have already been charges of insider trading at Coinbase Exchange. In July, the U.S. Department of Justice alleged a former Coinbase Exchange product manager, his brother and their friend with wire scam and token front-running. The trio were accused in that case, which revolved around tokens including TRIBE and ALCX, of making $1.5 million illegitimately.

 

The research study – which has not yet been peer reviewed – suggests the problem was broader than what emerged in that case, though, because the researchers said they found cases of token front-running that go beyond the scope of the allegations made in July.

 

Also Read: Binance Exchange Overtakes Coinbase Exchange: Holds The Most BTC

 

According to the paper written by Ester Felez Vinas, Luke Johnson and Talis J. Putnins “Our study shows significant price run-ups before official listing public announcements, similar to indicted cases of insider trading in stock markets. These results point to Crypto Markets being vulnerable to the same forms of misconduct and fraud that regulatory bodies have for a long time grappled with in traditional financial markets.”

 

A Coinbase Exchange spokesperson responded to the research study in a statement: “Coinbase takes charges of front-running incredibly seriously and we work hard to ensure all market participants have access to the same information. As part of this effort, we have taken steps to minimize the possibility of technical signals during asset testing and integration steps. We have zero tolerance for illicit behavior and monitor for it, conducting investigations where appropriate.”

 

Also Read: Coinbase Exchange Is Rapid Rise Left It Exposed In Crypto Winter

 

The study notes the date Sept. 25, 2018, when Coinbase Exchange updated its listing process to rapidly list new Digital Assets.

 

The study researchers said that they found at least four Cryptocurrency Wallets involved in suspicious insider trading. The behavior, repeated over and over, involved these Crypto Wallets buying coins in the hours before Coinbase Exchange announced it was going to list them.

 

Also Read: Coinbase Shares Drop On Billion-Dollar Loss In The Second Quarter And Revenue Miss

 

“Each crypto wallet sent funds to the next wallet to continue with a similar trading pattern: buying tokens prior to their listing public announcement and selling them after the announcement date,” the paper said.

 

The paper said that the four Crypto Wallets earned around 1,003 ether (ETH) in gains from such price jumps.