Major U.S. crypto wallet provider and exchange Coinbase has been granted a motion to dismiss a lawsuit over alleged insider trading during its launch of Bitcoin Cash (BCH) support last year, according to court documents published Oct. 23.
U.S. District Judge Vince Chhabria from the Northern District Court of California found that plaintiff Arizona resident Jeffrey Berk had “not sufficiently articulate[d] the legal bases for his claims” in his complaint.
The original class action had been filed against the exchange in March, with Berk representing all Coinbase customers who had allegedly “suffered monetary loss as a result” of the exchange’s “wrongdoing” in connection with its launch of BCH support during the period of Dec.19 - Dec. 21, 2017.
Berk had alleged that Coinbase employees and other insiders had benefited from trading on the basis of non-public information, stating that:
“On December 19, 2017, a month after tipping off its own employees as to when it would commence fully supporting BCH, Coinbase suddenly announced that it was opening up its books to the buying and selling of BCH within minutes after its announcements. Unsurprisingly, those who had been tipped off, immediately swamped Coinbase and the GDAX with buy and sell orders, thinning the liquidity but obtaining BCH at fair prices.”
This, the class action had alleged, “unfairly dr[o]ve up the price of BCH for non-insider traders once BCH came on line on the Coinbase exchange.”
In his response to the complaint, District Judge Chhabria found that:
“Berk fails to describe the scope or content of Coinbase’s duty in anything more than broad generalities. A reader of the Complaint is thus left wondering what Coinbase should have done differently, or why the rollout of Bitcoin Cash would have gone more smoothly had Coinbase done whatever Berk thinks is appropriate.”
Therefore, “[w]ith one exception,” the judge dismissed the class action without prejudice, leaving Berk and his legal representatives with 21 days to file an amended complaint.
The single exception referred to Berk’s claim under the Commodity Exchange Act, which the judge stated would have had enforcement jurisdiction only if Berk’s private claim had involved the purchase of a futures contract, rather than a commodity such as BCH. The judge therefore dismissed the claim with prejudice.
This week, a New York judge also dismissed an investor’s proposed class action lawsuit against the developers of altcoin Nano (XRB). The class action case had accused the alt’s core dev team of violating U.S. securities laws and negligently misrepresenting the reliability of Italian crypto exchange BitGrail, from which around 17 million XRB ($187 million at the time) was stolen in February.