Coinbase Faces New Class-Action Lawsuit Over Alleged Securities Deception Amid Strong Q1 Performance
Summary:
Coinbase, a top U.S cryptocurrency exchange, and its CEO, Brian Armstrong, face a new class-action lawsuit alleging the misleading of investors into buying securities reportedly forbidden by the organization's business model. Similar to a previous lawsuit, it asserts that Coinbase knowingly breached state securities laws in selling its digital assets. It aims at the recognition of a range of cryptocurrencies as securities and contests Coinbase's role as a securities broker. The plaintiffs seek complete rescission, statutory damages under state law, and injunctive relief through a jury trial. This situation is separate from Coinbase’s well-publicized legal dispute with the SEC. Despite these issues, Coinbase reported strong Q1 2024 results, aided by a market performance surge and the introduction of Bitcoin ETFs.
Coinbase, a leading cryptocurrency exchange in the U.S, along with its CEO, Brian Armstrong, is once again facing a class-action lawsuit. The suit revolves around accusations of misleading investors into purchasing securities, an act deemed illegal by the customers bringing the claim forward. This legal action closely mirrors a previous lawsuit filed against the organization. Initiated by legal firm Scott+Scott, the current lawsuit was filed on behalf of plaintiffs from California and Florida. It claims that Coinbase was aware of violating state securities laws while selling its digital assets, ever since the company's foundation. The lawsuit targets specific cryptocurrencies, namely Solana, Polygon, Near Protocol, Decentraland, Algorand, Uniswap, Tezos, and Stellar Lumens, declaring them as securities. The plaintiffs point out that the user agreement of Coinbase recognizes itself as a “Securities Broker”, and hence, any sales of digital asset securities rendered by the exchange would be classified as investment contracts or other securities. The primary disputes lie with Coinbase's prime brokerage acting as a securities broker/dealer. The plaintiffs' objectives comprise complete rescission, statutory damages under state law, and injunctive relief via a jury trial. While this suit bears a striking resemblance to another one alleging customer harm brought about by Coinbase's sale of securities, Coinbase contested that secondary crypto asset sales didn’t conform to securities transaction criteria, thereby challenging the applicability of securities regulations. The court subsequently studied various factors, subsequently ruling in favor of some earlier court decisions while rejecting others. This lawsuit should be differentiated from Coinbase’s widely-reported legal feud with the SEC regarding the classification of tokens sold on Coinbase as securities. In response to an issue raised by a judge allowing the case to advance, Coinbase recently lodged an interlocutory appeal. Additionally, in a filing made on April 26 in the U.S. District Court for the Southern District of New York, crypto lawyer John Deaton, who is currently campaigning for a Senate seat against Elizabeth Warren, filed an amicus brief in favor of a motion for an interlocutory appeal in favor of 4,701 Coinbase users. The exchange brandished strong Q1 2024 results, supplemented by a rise in market performance and the introduction of Bitcoin ETFs. Coinbase reported a total of $1.6 billion in revenue and $1.2 billion in net income for the first quarter, reaching the $1 billion dollar mark in Adjusted EBITDA, a measure of earnings prior to interest, taxes, depreciation and amortization.
Published At
5/5/2024 12:23:38 PM
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