Coinbase, the cryptocurrency exchange, and its CEO, Brian Armstrong, face a new class-action complaint alleging that their business model is illegal and that they tricked investors into purchasing securities.
The lawsuit claims that Coinbase’s sales of digital assets have been willfully breaking state securities laws since the company’s founding. Plaintiffs Gerardo Aceves, Thomas Fan, Edwin Martinez, Tiffany Smoot, Edouard Cordi, and Brett Maggard filed it in the United States District Court for the Northern District of California, San Francisco Division.
SOL, MATIC, Near, MANA, ALGO, UNI, XTZ, and Stellar coins allegedly violate securities laws. According to the complainants, Coinbase acknowledged in its user agreement that it is a “Securities Broker,” selling digital asset securities as investment contracts or other securities.
The plaintiffs demand full rescission in addition to statutory damages under state law and an injunctive remedy through a jury trial. This case is similar to another class-action lawsuit that claims Coinbase’s selling of securities injured consumers.
Coinbase has contested the applicability of securities laws, asserting that secondary sales of cryptocurrency assets don’t meet securities transaction criteria. However, despite the ongoing legal battle between Coinbase and the SEC, a new complaint has emerged. This dispute revolves around whether certain tokens on Coinbase constitute securities. In light of a recent judge’s ruling in the SEC case, Coinbase has opted to continue the legal process. Consequently, they have filed an interlocutory appeal.
John Deaton, the cryptocurrency attorney spearheading an effort to unseat Senator Elizabeth Warren, filed an amicus brief in support of a motion for interlocutory appeal on behalf of 4,701 Coinbase customers on April 26 in the U.S. District Court for the Southern District of New York.
The first quarter of 2024 saw Coinbase’s remarkable resurgence, buoyed by the introduction of spot Bitcoin exchange-traded funds. Additionally, improved market performance played a pivotal role. This resurgence propelled Coinbase to achieve $1 billion in adjusted earnings before interest, taxes, depreciation, and amortization. Notably, the exchange reported $1.6 billion in total revenue, alongside $1.2 billion in net income.
