Recently, a federal judge made a significant ruling in a proposed class action lawsuit against Coinbase, the largest US crypto exchange. The lawsuit, filed by shareholders, accuses Coinbase of downplaying the possibility of being sued by the US Securities and Exchange Commission (SEC). The judge, Brian Martinotti, rejected Coinbase’s motion to dismiss the lawsuit, acknowledging that shareholders had valid claims of being defrauded by Coinbase and its top executives.
The plaintiffs in the lawsuit, including Sjunde AP-Fonden, Ryan R. Firth, and Zvia Steinmetz, filed their case on May 10, 2023. The lawsuit paints a picture of Coinbase misleading investors by underestimating the risk of facing an enforcement action by the SEC. It specifically pointed out Coinbase’s emphasis on the fact that the crypto assets they listed were not securities, which in turn created a false sense of security among investors.
Coinbase’s legal troubles did not start with the shareholder lawsuit. In fact, the SEC filed a civil lawsuit against Coinbase on June 6, 2023, for allegedly operating an unregistered securities exchange. This news caused Coinbase’s COIN shares to plummet by up to 22%, leading to a flurry of class action lawsuits by investors who felt deceived by the company. Law firms like Bragar Eagel & Squire and Pomerantz LLP joined the legal battle against Coinbase, claiming that the company had misled the public regarding its compliance with regulations.
Despite Coinbase’s efforts to dismiss the SEC lawsuit, U.S. District Judge Katherine Polk Failla allowed the case to proceed, signaling a significant setback for Coinbase. On the market front, British bank Barclays’ research team upgraded Coinbase’s shares but adjusted the price target downwards, indicating a loss in confidence in the company’s future performance.
Coinbase finds itself embroiled in legal battles on multiple fronts, facing allegations of securities law violations and shareholder fraud. The outcome of these lawsuits will not only impact Coinbase’s financial standing but also set a precedent for how crypto exchanges are regulated and held accountable in the future. Investors and industry observers are closely watching the developments in this legal saga, which could have far-reaching implications for the crypto market as a whole.