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Coinbase cautious after Bitcoin Cash accusations

On heels of completed investigation, exchange indicates they’ll handle new coins differently

Coinbase

Coinbase’s homepage screen, once you log in.

Just before Coinbase formally added Bitcoin Cash (  ) to its trading platform in December of last year, the price skyrocketed. Candles showing Bitcoin Cash’s price were tall and green. Rumors that someone inside Coinbase leaked the addition of the new coin to the trading platform—or that employees themselves were taking advantage of the chance to buy low—were rampant.

Eight months later, Coinbase says their internal investigation into insider trading is complete. The company told Fortune they found no evidence of wrongdoing and did not terminate any employee as a result of their investigation.

“We would not hesitate to terminate an employee or contractor and/or take appropriate legal action if evidence showed our policies were violated,” a company spokesperson said to Fortune.

When Bitcoin Cash, the controversial hard fork of Bitcoin, was created in August 2017, Coinbase told users they had no plans to support the coin. They later reversed that decision, telling investors the exchange would support Bitcoin Cash by January 1, 2018.

But in mid-December, the coin popped up on Coinbase earlier than expected. Bitcoin Cash’s price had already boomed and a flurry of trading began, so much so that Coinbase decided to stop active trading because of “significant volatility.”

Social media was roaring with speculation and accusation. Coinbase CEO Brian Armstrong tweeted the company’s employee trading policy, warning that violators would be terminated. Coinbase seemed caught off guard, unsure if the exchange had just become the marquee example of an unregulated and dangerous digital financial market.

It published a retrospective on it’s blog. Importantly, it disclosed that employees were notified of the decision to support Bitcoin Cash on November 13, 2017, more than a month before Coinbase users would have full support for the forked coin. It said that in the first two minutes and forty seconds of trading, $15.5 million in trading volume occurred. Almost 90 percent of the volume was buy orders, sopping up liquidity in the market and forcing the price up.

“The launch did not go as expected,” Coinbase Vice President and General Manager Adam White said. “We understand why many of our customers and members of the community are upset.”

Coinbase told Fortune it hired two seperate law firms to conduct independent investigations on the matter.

“We can report that the voluntary, independent internal investigation has come to a close, and we have determined to take no disciplinary action,” the spokesman told Fortune.

Coinbase did not wait on the results of the Bitcoin Cash investigation before adding new coins to their exchange. Last month, Coinbase added Ethereum Classic (  ) to the exchange. Last week, they announced that five more coins are under consideration but stopped short of giving investors a trading date. The rollout was obviously different than that of Bitcoin Cash. The announcement on the exchange’s blog indicated a lesson has been learned:

“We are making this announcement internally at Coinbase and to the public at the same time to remain transparent with our customers about support for future assets,” the company said on its blog. “Going forward, you should expect that we will make similar announcements about multiple assets.”

Clark Fouraker is an award-winning investigative journalist whose stories have been featured on TV channels and websites across the country, including USA Today.