Coinbase faces class action over SEC lawsuit and asset risks

The shareholders accuse Coinbase and its top executives of downplaying the risk of an SEC enforcement action by falsely assuring that the crypto assets listed were not securities.
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A US federal judge has rejected Coinbase’s attempt to dismiss a class-action lawsuit from shareholders. The lawsuit claims that Coinbase, the largest US cryptocurrency exchange, misled investors by downplaying the chances of facing legal action from the US Securities and Exchange Commission (SEC). The ruling comes 15 months after the SEC sued Coinbase for allegedly operating as an unregistered securities exchange, leading to a significant drop in the company’s stock price.

The shareholders argue that Coinbase and its top executives falsely portrayed the company’s position, emphasising that the crypto assets it listed were not securities and thus unlikely to attract regulatory action. Additionally, they allege that the company misled investors about the risks customers faced regarding their assets in the event of bankruptcy. Coinbase’s share price fell sharply after revealing disappointing earnings and adding new disclosures in May 2022.

While the judge dismissed claims that Coinbase falsely denied engaging in proprietary trading, some allegations can proceed, including those about misrepresenting risks to customer assets. Coinbase remains confident in its legal standing and is prepared to defend its case in court.