3.2Coinbase may cancel Open Orders in the following circumstances.
a. Orders placed by Traders who, in our sole discretion, have engaged in abusive use of the platform, for example, Market Manipulation, or using the API in a manner which unreasonably burdens the platform.
An order that alters the price of a commodity by over 100%, or could have such an impact is a clear indicator of market manipulation, especially when coinciding with large buy orders at extremely low prices. This is speculative but a subpoena and analysis would show it easily.
d. If required for technical reasons as set out in section 3.4 or 3.5. below.
3.5 If access to GDAX through the Web Interface is unavailable for 5 minutes or longer, Coinbase will move GDAX to Cancel-Only Mode as soon as possible.
The sell order should not have been accepted, and…
3.4If technical reasons prevent or degrade Traders’ ability to place or cancel Orders, or prevent or degrade access to GDAX API or the Web Interface or affect the operation of GDAX Order Books or matching engines, then Coinbase may, in its discretion, take one or more of the following actions in respect of one or more Order Books.
a. Temporarily disable depositing or withdrawing Assets.
b. Cancel Open Orders.
c. Disable the ability to place new Orders (Cancel-Only Mode).
d. Disable sign-in.
e. Disable the GDAX API.
f. Disable access to the Web Interface.
Access was not just degraded, it was non existent, the system should have gone into cancel all orders mode, which again would have prevented this from happening.
I’m sure this also violated a large number of SEC rules.