A new study by three academics has found that insider trading at cryptocurrency exchange Coinbase Global may be more widespread than a case being pursued by federal prosecutors.
The study by academics at the University of Technology Sydney examined the activity around tokens on decentralized exchanges — which generally don’t require identity checks — in the 300 hours before Coinbase announced it would be added to its platform, Bloomberg reported Wednesday (Aug. 17).
Using statistical analysis, the researchers — Ester Félez-Viñas, Luke Johnson and Talis J. Putnins — estimated that between 10% and 25% of Coinbase listings since 2018 showed signs of insider trading, per the report.
“Here we have a unique data set — the blockchain — which we don’t have in the stock market that allows us to get more direct evidence,” Putnins said in the report.
Responding to the report, a Coinbase spokesperson told Bloomberg, “Coinbase takes allegations of frontrunning incredibly seriously, and we work hard to ensure all market participants have access to the same information. We have zero tolerance for illicit behavior and monitor for it, conducting investigation where appropriate.”
The report follows a July announcement by the U.S. Department of Justice (DOJ) that a former manager for Coinbase and two other men were all charged with wire fraud conspiracy and wire fraud.
In what the department called the first-ever insider trading case involving cryptocurrency, the charges stem from a scheme to commit insider trading in cryptocurrency assets by using confidential Coinbase information about which crypto assets were due to be listed on the company’s exchange.
The alleged insider trading netted the three men $1.5 million.
The price spike ahead of forthcoming announcements by Coinbase that it would list a new token has become known as the “Coinbase Effect.”
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