Coinbase, a popular cryptocurrency exchange, and its CEO Brian Armstrong are facing a fresh class-action lawsuit that accuses them of deceiving investors and engaging in illegal business practices.
The lawsuit, which was filed in the United States District Court for the Northern District of California San Francisco Division, represents a group of plaintiffs from California and Florida, including Gerardo Aceves, Thomas Fan, Edwin Martinez, Tiffany Smoot, Edouard Cordi, and Brett Maggard. They allege that Coinbase has knowingly violated state securities laws since its inception by selling digital assets that are considered securities.
The lawsuit specifically claims that tokens such as SOL, MATIC, NEAR, MANA, ALGO, UNI, XTZ, and XLM are securities. The plaintiffs argue that Coinbase has acknowledged its role as a “Securities Broker” in its user agreement, thereby acknowledging that the digital asset securities sold on the platform are investment contracts or other securities. They also argue that Coinbase Prime brokerage is also a securities broker.
In response to these allegations, the plaintiffs are seeking full rescission, statutory damages under state law, and injunctive relief through a jury trial. It is worth noting that this lawsuit is similar to another class-action suit that accuses Coinbase of causing consumer harm through the sale of securities.
Coinbase has previously argued that the secondary sales of crypto assets on its platform do not meet the criteria for securities transactions and has questioned the relevance of securities regulations.
It is important to distinguish this new lawsuit from Coinbase’s highly publicized legal battle with the U.S. Securities and Exchange Commission (SEC), which also raises questions about whether tokens sold on Coinbase should be classified as securities. Coinbase has recently filed an interlocutory appeal in response to a judge’s decision allowing the case to proceed.
In a separate development, John Deaton, a crypto lawyer who is currently running an election campaign to unseat Senator Elizabeth Warren, has filed an amicus brief in support of a motion for interlocutory appeal on behalf of 4,701 Coinbase customers. This filing was made in the U.S. District Court for the Southern District of New York.
Despite the legal challenges it is facing, Coinbase has reported a strong rebound in the first quarter of 2024. This was driven by improved market performance and the launch of spot Bitcoin exchange-traded funds. The exchange recorded $1.6 billion in total revenue and $1.2 billion in net income for the first quarter, with $1 billion in adjusted earnings before interest, taxes, depreciation, and amortization.
In conclusion, Coinbase and its CEO Brian Armstrong are facing a new class-action lawsuit that alleges securities law violations and deceptive practices. The plaintiffs are seeking legal remedies through a jury trial. This lawsuit is separate from Coinbase’s ongoing legal battle with the SEC, and the company has reported strong financial performance in the first quarter of 2024.