Coinbase CEO Brian Armstrong has warned against insider trading linked to memecoins, emphasizing that such activities are illegal and could lead to prison time.

In a post on X on Feb. 19, Armstrong highlighted concerns over insider trading in the memecoin market. He cautioned that some traders had crossed legal boundaries, making it clear that law enforcement should take action against offenders.

According to him:

“Some memecoins have clearly gone too far lately, to the extent people are insider trading. This is illegal, and people should understand that you will go to prison for this.”

Armstrong highlighted that every crypto market cycle attracts a wave of speculators looking for quick gains.

He stressed that chasing fast money through illegal means often ends badly as authorities crack down on wrongdoing. Instead, he urged investors to build value-driven projects that contribute meaningfully to the industry.

Insider trading and heavy losses

Armstrong’s comments follow recent revelations of insider trading linked to political-themed memecoins like Libra.

On-chain data from blockchain analytics firm Nansen uncovered patterns of early access trading that led to massive profits for a select few. At the same time, the majority of investors suffered significant losses.

The firm pointed out that some of the biggest winners included one trader who was trading with the wallet “HyzGo2,” which made $5.1 million in profit by purchasing tokens early and exiting under an hour of

Nansen also pointed out that 86% of LIBRA investors lost their entire stake, resulting in total losses of $251 million. According to the firm:

“Looking across all wallets that had an absolute gain or loss of more than $1,000, we find a total of 15,431 wallets. Out of these, 86.07% of the addresses have realized losses amounting to $251 million.”

This continues a broader trend in the political memecoin sector, where investor losses have approached $4 billion.

A study by Chainplay found that 78% of investors were drawn in by political branding and viral marketing, with 37% being first-time buyers. Many saw their investments wiped out as the hype faded and prices collapsed.

What next for memecoins?

Despite the setbacks, Armstrong believes memecoins could still play a meaningful role in the crypto industry.

The Coinbase CEO acknowledged that while some bad actors exploit the hype, legitimate projects can provide value. He also suggested that memecoins could evolve beyond speculation, potentially benefiting artists and tracking cultural trends.

He added:

“Memecoins are a canary in the coal mine that everything will be tokenized and brought onchain (every post, image, video, song, asset class, user identity, vote, artwork, stablecoin, contract etc).”

Considering this, Armstrong stressed the importance of eliminating unethical actors while supporting innovation in the sector.

He reiterated that crypto should prioritize real-world applications, helping users generate income, access financial services, and send money with lower fees.

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