- A US judge has allowed a class action lawsuit against Coinbase by shareholders to proceed
- The lawsuit centers on claims that Coinbase downplayed the likelihood of facing legal action from the SEC, which materialized in June 2023
- The court found that Coinbase may have provided false assurances regarding the compliance of its listed crypto assets with US securities laws
A US District Judge has ruled that a class action lawsuit filed by Coinbase shareholders can move forward, deepening the legal troubles for the cryptocurrency exchange. The lawsuit alleges that Coinbase misled its investors by minimizing the risk of regulatory action from the US Securities and Exchange Commission (SEC), which ultimately filed a lawsuit against the exchange in June 2023. This decision comes at a time when Coinbase is facing increased scrutiny from regulators around the world.
Heightened Legal Pressure
Coinbase has been facing mounting legal challenges in recent years as regulators continue to crack down on the cryptocurrency industry. The lawsuit, filed by a group of shareholders, claims that Coinbase made “materially false and misleading statements” about the potential for SEC enforcement.
The shareholders, who purchased shares starting in 2021, argue that the company assured investors that the crypto assets listed on its platform were not considered securities, despite the looming risk of SEC action.
According to the court filings, US District Judge Brian Martinotti, presiding over the case in New Jersey, ruled that the plaintiffs have presented a plausible argument that Coinbase may have acted negligently. The court’s decision suggests that Coinbase may have downplayed the likelihood of facing legal action from the SEC, even though that risk became a reality in June 2023, when the SEC sued Coinbase for allegedly violating federal securities laws.
Ongoing Regulatory Challenges
The class action lawsuit is just one of several legal battles Coinbase is currently embroiled in. In addition to the shareholder suit, the exchange is also fighting a lawsuit filed by the SEC, accusing it of violating US federal securities laws. Despite Coinbase’s efforts to dismiss the SEC’s claims, the judge found that the regulator’s arguments warranted further examination, suggesting the exchange could face an uphill legal battle.
Coinbase secured a partial victory last week in this case when the judge ruled that the SEC must turn over a raft of communications over its treatment of crypto as a security, communications Coinbase hopes will show the agency undermining its own claims.
