A federal judge has denied Coinbase’s request to dismiss a proposed class action lawsuit filed by shareholders. The lawsuit alleges that the largest crypto exchange in the United States, Coinbase, minimized the possibility of being sued by the US Securities and Exchange Commission (SEC).
US District Judge Brian Martinotti determined that stockholders have made sufficient claims that Coinbase and its top executives engaged in fraudulent activities against them. The plaintiffs Sjunde AP-Fonden, Ryan R. Firth, and Zvia Steinmetz filed the complaint on May 10, 2023.
The ruling was made 15 months after the Securities and Exchange Commission (SEC) filed a civil case against Coinbase on June 6, 2023, accusing them of running an unlicensed securities exchange.
Martinotti’s finding permits shareholders to pursue allegations that Coinbase made false representations regarding the potential loss of assets held by customers in the event of bankruptcy.
Although the judge rejected allegations that Coinbase made false denials about engaging in proprietary trading, CEO Brian Armstrong and other officials are still defendants in the lawsuit.
On June 6, 2023, Coinbase faced a lawsuit from the SEC for numerous purported breaches of securities law, including acting as an unregistered broker and providing unregistered securities.
Coinbase submitted a plea to the District Court of New York requesting the complete dismissal of the SEC’s legal enforcement. However, U.S. District Judge Katherine Polk Failla decided that the lawsuit may proceed, which is a significant victory for the regulator in its case against Coinbase.
In September, Barclays, a British bank, raised Coinbase’s shares from underweight to equal weight, despite the recent unfavorable development. This indicates that the exchange is likely to perform on par with the whole industry for the next 12 months.
