In a significant legal development, a federal judge has denied Coinbase’s motion to dismiss a class-action lawsuit filed by shareholders. The lawsuit alleges that the popular US crypto exchange misled investors about the possibility of facing legal action from the US Securities and Exchange Commission (SEC).
The plaintiffs, including Sjunde AP-Fonden, Ryan R. Firth, and Zvia Steinmetz, claim that Coinbase downplayed the risk of being sued by the SEC by repeatedly emphasizing that the crypto assets they traded were not securities. The lawsuit was filed in May 2023, following the SEC’s civil lawsuit against Coinbase for allegedly operating an unregistered securities exchange.
US District Judge Brian Martinotti’s ruling allows the shareholders to pursue claims that Coinbase misrepresented the risk of customers losing their assets stored with the company in case of bankruptcy. While some claims were dismissed, CEO Brian Armstrong and other executives remain defendants in the case.
Coinbase has expressed confidence in its position, stating that they believe they are in the right both legally and factually. Despite the legal challenges, the company remains steadfast in its mission and looks forward to defending its case in court.
Following the SEC’s lawsuit, Coinbase’s COIN shares experienced a significant drop, causing unrest among investors. This led to multiple class-action lawsuits being filed against the exchange by investors who felt misled. Even though Coinbase attempted to have the SEC’s enforcement dismissed, a US District Court judge ruled in favor of allowing the lawsuit to proceed.
Despite the legal turmoil, Barclays, a British bank, upgraded Coinbase’s shares from underweight to equal weight in September. However, they also adjusted the price target for COIN shares, predicting an 18% drop in value.
The legal troubles facing Coinbase signify a challenging period for the crypto exchange. While the company remains confident in its defense, the outcome of the lawsuits and the impact on its business remain uncertain. It is crucial for investors and stakeholders to closely monitor the developments in this case to assess the potential risks and implications for Coinbase’s future operations.
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