COIN Stock Alert: What to Know as Coinbase Responds to Insider Trading Charges

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  • Coinbase (COIN) stock is still reeling from the arrest of a former employee, on charges of insider trading.
  • Coinbase leadership has issued some transparent comments regarding the company’s knowledge of the misconduct.
  • COIN stock is down 6% so far today, adding to its more than 70% losses this year
coin stock - COIN Stock Alert: What to Know as Coinbase Responds to Insider Trading Charges

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Coinbase (NASDAQ:COIN) stock is under fire today in the wake of its insider trading scandal Thursday. COIN is down over 5% as Coinbase leadership attempts damage control on what is shaping up to be, a PR nightmare. The cryptocurrency platform has already had a singularly unfortunate year, this weeks news only adds to its list of woes.

Former Coinbase Employee Arrested for Crypto Insider Trading

Last night, news broke that a former employee, an ex-product manager, allegedly took advantage of his position to purchase cryptos ahead of their listings on Coinbase. Ishan Wahi was arrested by the Department of Justice Thursday alongside his brother, Nikhil Wahi, and Sameer Ramani. It is the first recorded case of charges being levied against an individual for cryptocurrency insider trading.

FBI Assistant Director Michael J. Driscoll commented on the unprecedented nature of the arrests:

Although the allegations in this case relate to transactions made in a crypto exchange – rather than a more traditional financial market – they still constitute insider trading.  As alleged, the defendants made illegal trades in at least 25 different crypto assets and realized ill-gotten gains totaling approximately $1.5 million. Today’s action should demonstrate the FBI’s commitment to protecting the integrity of all financial markets – both ‘old’ and ‘new.’

Wahi was likely trying to take advantage of the the “Coinbase” effect — the well documented phenomenon of cryptocurrencies skyrocketing in value after being listed on major crypto platforms, like Coinbase or Binance (BNB-USD). With prior knowledge of the listing, it would be trivially easy to purchase the crypto ahead of time.

Coinbase leadership has since responded to the scandal. Coinbase Chief Executive Brian Armstrong took to Twitter to announce the company had already investigated insider trading and identified three potential suspects. As per the tweets, the company had been aware of the misconduct since April, and had already terminated the suspect, while simultaneously informing law enforcement.

COIN Stock Continues Its Downward Descent

Coinbase’s latest scandal is the cherry on top of an already disastrous year for the company. COIN stock is down more than 70% this year as one of the worst casualties of the tech and crypto pullback. Indeed, flagship cryptos like Bitcoin (BTC-USD) and Ethereum (ETH-USD) have lost more than half their value in just the past seven months. As a result, Coinbase has seen its share price take a more than proportionate tumble.

COIN’s losses have had drastic affects on the company’s budget and management. Last month, a leaked email suggested Coinbase would back out of all new job offers and virtually freeze new hiring.

If that wasn’t enough, just last week the company cancelled its affiliate marketing program. To add salt to the wound, just says after the announcement, Binance, the top crypto exchange platform by market capitalization and known Coinbase rival, launched its own affiliate marketing program. The program allows Binance users to apply to become affiliates for Bitcoin, earning handsome rewards for recruiting new users.

That is all to say, Coinbase has seen better days. Each week seemingly brings news of budget cuts from the downtrodden exchange. And unfortunately, investors have been keeping up every step of the way.

On the date of publication, Shrey Dua did not hold (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.


Article printed from InvestorPlace Media, https://investorplace.com/2022/07/coin-stock-alert-what-to-know-as-coinbase-responds-to-insider-trading-charges/.

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