A federal judge in New Jersey has rejected Coinbase’s attempt to dismiss a class action lawsuit from shareholders who accused Coinbase of underestimating the likelihood that the exchange would be sued by the U.S. Securities and Exchange Commission (SEC).
Judge Brian Martinotti ruled on September 5 that there is sufficient evidence to proceed with the charges. The case centers on alleged deception by Coinbase and its top executives, who allegedly painted an overly optimistic picture of the likelihood of an SEC enforcement action. Coinbase allegedly repeatedly emphasized that the crypto assets it trades are not securities, which shareholders said was misleading.
Heavy loss for shareholders
On June 6, 2023, the SEC filed a civil lawsuit against Coinbase, accusing the company of operating as an unregistered securities exchange. That same day, Coinbase’s stock price plummeted 12%. Judge Martinotti found that shareholders were justified in claiming they had been misled by Coinbase’s positive communications about legal risks.
In his 50-page ruling, the judge also noted that shareholders can bring claims over the risks that customers would lose their assets in the event of Coinbase’s bankruptcy. This came after the stock price fell 26% on May 11, 2022, following a warning from the company about additional risks and disappointing quarterly results.
Coinbase’s Defense
Coinbase responded to the ruling by saying that it is confident in the facts and the law, and that it will defend its case. However, the judge dismissed several other claims, including the allegation that Coinbase engaged in proprietary trading, which the company denied.
Background to the lawsuit
The proposed class action lawsuit, led by Swedish pension fund Sjunde AP-Fonden, covers shareholders who held shares in Coinbase between April 14, 2021, and June 5, 2023. The lawsuit follows Coinbase’s previous attempt to have another SEC case dismissed, which was dismissed by a Manhattan federal judge in March 2024.
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Source: https://newsbit.nl/rechter-geeft-groen-licht-coinbase-aangeklaagd-voor-misleiding-aandeelhouders/
