A New York law firm, Tripp Levy PLLC, says it is investigating Coinbase “for allegedly making false and misleading statements” over the launch of its bitcoin exchange.
The headline in Coinbase’s January 26 blog post reads, “Coinbase Launches First Regulated Bitcoin Exchange in the U.S.” Coinbase typically takes a conservative approach to things, and such a headline did seem out of sorts.
The headline is not entirely accurate either. While it may have obtained money services licensing in some states, “regulation” technically does not yet exist. Furthermore, there are several exchanges in the US that are no less “regulated” than Coinbase.
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Several media outlets used a similar headline, thereby gaining a wider audience and granting greater credibility to the claim. Many readers also did not notice such nuances, which were largely lost in the hype and excitement at the time.
The law firm did not go into explicit specifics of what type of legal action, if any, may emerge from its investigation. It welcomes users of the exchange to provide additional information for the investigation or to obtain information about it.
It did make reference, however, to the sharp run-up in prices between the announcement and actual launch, followed by an equally steep drop in prices immediately after launch. At the time, the price action did raise eyebrows, but has been largely overlooked until now. The bitcoin trading market is indeed unregulated and such volatility has become an accepted reality.
The firm blames the drop in prices on announcements by California and New York regulators stating that the exchange is not regulated, alleging that Coinbase’s claims inflated prices and caused investors to lose money.