Coinbase CEO Brian Armstrong Changes Rules To Counter Insider Trading Allegations

Brian Armstrong — the CEO of major U.S.-based cryptocurrency exchange Coinbase Global Inc. COIN — responded to insider trading accusations by changing internal rules concerning listings.

What Happened: In a Thursday post published on the official Coinbase blog, Armstrong admitted "there is always the possibility that someone inside Coinbase could, wittingly or unwittingly, leak information to outsiders engaging in illegal activity." While he did not confirm or deny any disciplinary actions or criminal charges against company employees for using insider information to profit off of asset listings, he wrote:

"We have zero tolerance for this and monitor for it, conducting investigations where appropriate with outside law firms [...] If these investigations find that any Coinbase employee somehow aided or abetted any nefarious activity, those employees are immediately terminated and referred to relevant authorities (potentially for criminal prosecution).”

Why It Matters: Coinbase's CEO noted employees can only trade cryptocurrency on the company's platforms to ensure their transactions can be monitored and correct conduct verified.

Earlier this month, a Twitter user shared an alleged screenshot of the assets held by an Ethereum ETH/USD 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."

The post did not include the wallet's address making it impossible to easily verify the claim, but it still made waves in the space and was featured on multiple cryptocurrency news outlets. Now, Armstrong wrote there are "some market participants" that might have managed to profit off of its listing process through on-chain activity monitoring allowing it to detect Coinbase's testing asset integrations and detecting small differences in its application programming interface responses.

The executive said "while this is public data, it isn’t data that all customers can easily access" which is why the exchange intends "to remove these information asymmetries."

Photo: Courtesy Coinbase