- A study from University of Technology Sydney says that insider trading at Coinbase is worse than first thought
- Researchers found that insider trading “occurs in 10-25% of cryptocurrency listings” on the exchange
- A former Coinbase product manager is already in custody on similar charges
A study by three academics at University of Technology Sydney (UTS) has revealed “systematic insider trading in cryptocurrency markets”, highlighting Coinbase as an example. The study, Insider Trading in Cryptocurrency Markets, was conducted by two professors and a researcher at UTS and found that up to 25% of Coinbase listings in the past four years have been accompanied by spikes in activity of those coins prior to the listing being announced. The research comes in the wake of accusations that a former Coinbase executive worked with two accomplices to earn $1.5 million from such practices.
Study Finds Unusual Activity Before Listing Announcements
The study hypothesised that activity of coins about to be announced as listed on Coinbase would see unusual activity on decentralised exchanges prior to the announcement and directly afterwards, making the most of a potential pump in the price.
This activity, the researchers claimed, was due to inside information being passed on and acted upon by accomplices of the Coinbase employee supposedly leaking the information. Researchers examined price movements in token listings 300 hours before the listing announcement and up to 100 hours afterwards to observe any abnormal trading patterns that could be potential evidence of insider trading.
What they found was that on multiple occasions, private wallets accumulated coins ahead of a listing announcement from Coinbase, buying through a decentralised exchange, and then selling after the announcement. On average, coins that traded on decentralised exchanges jumped 40% compared to a market benchmark in the 300 hours before the Coinbase announcement, rising another 2% over the subsequent 100 hours.
10-25% of Listings Accompanied by Insider Trading
The authors summarise that “insider trading trading occurs in 10-25% of cryptocurrency listings and as a lower bound, insiders earned $1.5 million in trading profits.” The researchers add that their findings “identify cases that are yet to be prosecuted”, adding weight to the theory that the accused Coinbase inside-trader Shan Wahi is not the only proponent of the dark art.