An unknown trader can earn $2.6 million in a lawsuit against Coinbase

Shares of crypto company Coinbase have plummeted this week due to lawsuits filed by the U.S. securities regulator, according to information released by Business Insider.

24 minutes before the official SEC announcement of the lawsuit against the Binance exchange, an unknown trader made a massive options trade, betting on a declining share price. Now it is important when and whether the trader closes his position, and with the best outcome, the transaction can bring him a profit of $ 2.6 million.

First, the SEC filed a lawsuit against Binance, and then against Coinbase, which led to a fall in the prices of assets related to the cryptosphere. Binance shares were down 9% on Monday and Coinbase shares fell another 21% on Tuesday after the lawsuit was announced. Overall, their shares fell 28% over the week.

An unknown investor managed to take advantage of this situation and closed a highly profitable deal just a few minutes before the SEC announced the lawsuit against Binance. On Monday, he bought 4,806 $50 put contracts when the stock traded at $61.77. It was a bet that the share price would fall below the exercise level. The options were purchased at 18 cents each and then sold for almost $1. If the investor had closed his position at the very peak, he could have made a profit of 460%.

On Tuesday, the price of options rose to $5.65 apiece as Coinbase shares continued to decline. Given the original purchase price of the puts of $86,500, the trade could have netted the investor $2.6 million in just one day if he had held onto the stock after the initial drop and closed the trade at the right time.

It is also important to note that this is the second suspiciously profitable trade in the last few weeks. A previously unidentified investor placed a large option bet on the growth of Equitrans Midstream Corporation stock just days before a debt ceiling agreement was struck that turned out to be surprisingly beneficial for the company. Indeed, the company's shares rose and the trader made a profit of $7.5 million.