Mystery bet before US SEC crypto crackdown may mint trader millions

LESS than a half hour before US regulators cracked down on a key crypto exchange, an options trader made a short-term bet against Coinbase Global that may have netted them millions of dollars.

At 10.36 am on Monday (Jun 5), a block of 4,806 contracts of Coinbase US$50 puts expiring on Friday hit the tape when the stock was at US$61.77. Roughly 24 minutes later, the Securities and Exchange Commission (SEC) announced that it was suing Binance Holdings, sparking a selloff across the crypto universe.

By noon in New York, Coinbase shares had fallen nearly 12 per cent and the options, which had been bought for 18 US cents each, traded for as much as US$1 – a gain of almost 460 per cent if sold at the peak.

The already profitable bet became even more lucrative on Tuesday after the SEC announced a separate suit again Coinbase itself.

Shares of the cryptocurrency exchange tumbled as much as 21 per cent at the opening of trading, driving the value of the put options to US$5.65 each. The move means a trader could have potentially turned a US$86,500 investment – the sum spent on buying the puts – into a windfall of as much as US$2.6 million in less than a day.

The prescient Coinbase trade comes just days after a mystery trader placed a large bullish bet on natural gas pipeline operator Equitrans Midstream ahead of language supporting the company’s project being inserted into the debt-ceiling bill, raising questions about whether details had leaked. BLOOMBERG