Judge Says Coinbase's Bitcoin Trading Launch Was Bungled, but Likely Not Fraudulent

U.S. District Judge Vince Chhabria of the Northern District of California. Photo: Jason Doiy/ALM

Coinbase will likely sidestep allegations of insider trading amid the December launch of its bitcoin cash trading feature, but U.S. District Judge Vince Chhabria said the cryptocurrency exchange company clearly botched the rollout.

Chhabria said investors' negligence claims get past the San Francisco-based company's motion to dismiss a second amended complaint, filed by Arizona resident Jeffrey Berk. The bitcoin cash investors allege the company recklessly deployed trading of the currency Dec. 19 and abruptly shut it down a mere two minutes after opening, saddling some users with charges hours later at a market price nearly $2,000 higher than when they placed the order.

“When it began supporting trading in bitcoin cash, it had an obligation to create a fair and orderly market for that commodity, and it did not satisfy that duty, and they owed that duty to anyone that would be trading on that platform,” Chhabria said during a hearing in the U.S. District Court for the Northern District of California.