Coinbase wants to be transparent. But crypto insider trading is cloudy.

Some think its attempt to provide more disclosure around its plans to list tokens is just damage control.


Speculators have long agitated for Coinbase and other big exchanges to list their favored cryptocurrencies.

Illustration: Christopher T. Fong/Protocol

A push by Coinbase to become more transparent has just made things cloudier, with accusations of insider trading flying on Twitter.

Speculators have long agitated for Coinbase and other big exchanges to list their favored cryptocurrencies, with the belief that such support offers both legitimacy and liquidity, particularly for newer tokens. The crypto powerhouse announced Monday it would start posting a list of tokens being considered for listing, including three dozen this quarter.

Coinbase had previously kept its plans close to the vest, so the unexpected move provoked a lot of head-scratching. A well-known crypto podcaster, Jordan Fish, who goes by Cobie in the community, soon provided a theory.

Fish said Tuesday he had found an Ethereum wallet that had “bought hundreds of thousands of dollars” worth of tokens “exclusively featured” in the Coinbase list “about 24 hours before it was published.”

Coinbase said the “pilot” was “an effort to increase transparency by providing as much information symmetry as possible.” In addition to the list of tokens, it provided an explanation on how Coinbase makes listing decisions. The company “had nothing further to share” about the listing announcement, a spokesperson told Protocol.

The scheme described in Fish’s tweet is classic frontrunning. It’s a bet based on insider information: in this case, the listing of a cryptocurrency on a major exchange like Coinbase. Because of the liquidity Coinbase’s big customer base provides, the listing of a token usually sends its price up.

As a publicly traded company, Coinbase is required to report instances of insider trading in its shares. But crypto? With the U.S. government still unsure if tokens are securities or commodities, it’s not clear who could or would take action.

There’s a history of crypto exchanges having trouble with token listings. In 2019, there were allegations that employees had bought Bitcoin Cash ahead of its listing. In 2021, the CFTC investigated Binance for insider trading. (Binance said at the time that it had a “zero tolerance” policy against insider trading.)

“Insider trading doctrine clearly applies to most familiar crypto assets and their trader,” UCLA law professor Andrew Verstein wrote in the Iowa Law Review in 2019. “The legal requisites for insider trading regulation — jurisdiction, material non-public information, breach of duty — are frequently satisfied.”

But until legislators and regulators resolve some of the big questions around cryptocurrency, enforcement may continue to prove tricky.

It’s “hard to know” if the Coinbase announcement and Fish’s claims are related, Silicon Valley investor Rob Siegel, a Stanford Graduate School of Business lecturer, said.

But, he added, embracing a new policy for token disclosures makes sense for Coinbase “given that crypto is desperately trying for legitimacy.”

“In many instances, disclosure is good for conflicts of interest,” he told Protocol. “Perhaps this is just Coinbase doing good governance and pushing it now so as to ‘stay clean.’”

Michael Fasanello, chief compliance officer of LVL, speculated that “a catalyst” for the Coinbase announcement “could be to mitigate claims of insider trading.”

The timing of Coinbase’s announcement remained an oddity for some.

Alex Johnson, author of the Fintech Takes newsletter, said the Coinbase blog post “makes it seem an awful lot like Coinbase knew that someone had an information advantage and had already acted on it.”

“Publishing this blog post seems more like a weird attempt at damage control than an attempt to prevent this problem from happening again in the future,” he told Protocol.

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