Study Confirms That Coinbase Insider Trading Issue Is Bigger Than Previously Thought
- A study conducted by three finance researchers at the University of Technology in Sydney claims that Coinbase has been found guilty of facilitating insider trading.
- According to the report, such activities have taken place on up to 25% of Coinbase listings in the last 4 years.
Three researchers from the University of Technology in Sydney, Australia, recently claimed that the crypto industry, particularly crypto exchange Coinbase, is filled with “systematic” insider trading.
In a not-yet-peer-reviewed report titled “Insider Trading in Cryptocurrency Markets,” researchers estimated that between September 2018 and May 2022, insider trading is estimated to have taken place on 10–25% of the crypto listings on the San Francisco-based exchange. The researchers assert that this led to illegal gains of at least $1.5 million.
“Our findings identify cases that are yet to be prosecuted,”they wrote.
The growing perception of insider trading in cryptocurrencies, according to professors Ester Felez Vinas, Talis Putnins, and PhD candidate Luke Johnson, may shock informed potential investors. The report argued that it could even “impede adoption of cryptographically secured ways of representing securities and other financial instruments.”
The researchers looked at 146 Coinbase token listings and their values 100 to 300 hours before each new listing went live on the exchange to check for a specific duration of time to note any unusual trading patterns of such assets on decentralized exchanges (DEXs), which do not need proof of identity.
The researchers noted an “evident run-up pattern” around 250 hours prior to the listing announcement.
“The run-up continues until the listing announcement event, where we see a jump in price because of new information entering the market and traders reacting to the news. The run-up pattern we observe is consistent with the run-ups in prosecuted cases of insider trading in stock markets,”the report reads.
Allegations of insider trading have already been made in relation to Coinbase listings. As BitcoinWisdom reported, Ishan Wahi, a former product manager at Coinbase, has been charged by the U.S. Justice Department with charges related to alleged insider trading along with two other people. Authorities assert that Wahi participated in a scheme in which he, his brother, and a friend unlawfully used advance notice of Coinbase asset listing announcements and made over $1.1 million in profit.
However, an anonymous representative from Coinbase told Decrypt that the recent study does not provide enough evidence of insider trading and “jumps to conclusions.” However, the exchange takes “allegations of front-running incredibly seriously,” it added.
“We work hard to ensure all market participants have access to the same information. As part of this effort, we take 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,” the Coinbase spokesperson continued.