After allegations of insider trading by individuals potentially connected to Coinbase were made by some cryptocurrency sleuths, CEO Brian Armstrong said the crypto exchange would change some of its token listing practices.
In a Thursday post on his blog, Armstrong would not confirm whether any Coinbase employees had been disciplined or referred to criminal charges in response to alleged receipt of inside information used to profit from certain token listings. According to the CEO, Coinbase planned to change its listing process in the coming quarters “to try to prevent on-chain data from giving cues to astute traders,” allow users to rate and review assets, and invest more in forensic tools. .
“There is always the possibility that someone inside Coinbase could knowingly or unknowingly leak information to people outside the company who are engaged in illegal activities,” Coinbase CEO said. “We have zero tolerance for this and we keep an eye on it, conducting investigations where necessary with outside law firms. […] If these investigations uncover that any Coinbase employee in any way aided or abetted any nefarious activity, those employees are immediately terminated and referred to the appropriate authorities (potentially for criminal prosecution).”
According to Armstrong, employees are limited to trading crypto on Coinbase platforms by their company policies in order to monitor transactions and “preempt potential abuse.” Nevertheless, Cointelegraph reported in April that some online sleuths alleged that certain investors had insider knowledge of tokens that Coinbase said it was considering listing in Q2 2022, based on blockchain records of purchases before the exchange published that information.
Found an ETH address that bought hundreds of thousands of dollars of tokens exclusively featured in the Coinbase Asset Listing post about 24 hours before it was published, rofl pic.twitter.com/5QlVTjl0Jp
—Cobie (@cobie) April 12, 2022
I found an ETH address that bought hundreds of thousands of dollars worth of tokens listed exclusively on the Coinbase Asset Listing post approximately 24 hours before it went live
Coinbase’s CEO said “some market participants” may have been able to leverage its listing process by using on-chain data to monitor exchanges’ test asset integrations, as well as detecting small differences in the responses of the platform’s application programming interface, or API. He added that the exchange would not “catch everything” but instead would try to work with other crypto firms and respond to feedback to adjust policies as needed.
“While this is public data, it is not data that is easily accessible to all customers, so we strive to eliminate these information asymmetries,” Armstrong said. “We review assets as quickly as possible and list as much as we can, as long as we believe it’s safe and legal.”
A listing on Coinbase can often result in a price surge for a crypto project due to the size and popularity of the exchange. In May 2020, the price of OMG Network’s OmiseGo token surged 200% within 15 minutes of listing on Coinbase before crashing. Morpheus Labs (MITX), Kromatika (KROM), and Big Data Protocol (BDP), all tokens Coinbase named as being considered for listings, showed gains of 185%, 145%, and 204%, respectively, shortly after the exchange’s announcement on April 202.
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