A recent development in the crypto world has seen a federal judge denying Coinbase’s motion to dismiss a proposed class action lawsuit by shareholders. The lawsuit accuses the leading US crypto exchange of misleading shareholders about the possibility of being sued by the US Securities and Exchange Commission (SEC). The ruling by US District Judge Brian Martinotti on Sept. 5 highlights the allegations of fraud against Coinbase and its top executives. The lawsuit specifically points out how Coinbase painted a favorable picture of the unlikelihood of facing enforcement actions by the SEC.
The lawsuit, filed on May 10, 2023, by plaintiffs Sjunde AP-Fonden, Ryan R. Firth, and Zvia Steinmetz, has created a legal storm for Coinbase. The allegations come just 15 months after the SEC’s civil lawsuit against Coinbase for operating an unregistered securities exchange. The recent ruling by Martinotti allows shareholders to pursue claims against Coinbase for misrepresenting the risks associated with customers losing assets in case of the company’s bankruptcy. Although claims of false denial of proprietary trading were dismissed, CEO Brian Armstrong and other executives remain embroiled in the legal battle.
Following the SEC’s lawsuit against Coinbase in June 2023, the exchange’s COIN shares plummeted by up to 22%. This drop in share value sparked a series of class action lawsuits by investors who felt deceived by Coinbase’s actions. Law firms such as Bragar Eagel & Squire and Pomerantz LLP filed lawsuits, alleging that Coinbase misled the public about the level of compliance in its operations. Despite Coinbase’s attempt to dismiss the SEC’s legal enforcement in New York, U.S. District Judge Katherine Polk Failla’s ruling allowed the lawsuit to proceed, marking a significant setback for the exchange.
In the midst of legal turmoil, British bank Barclays’ research team surprisingly upgraded Coinbase’s shares from underweight to equal weight in September. However, Barclays adjusted the price target for COIN shares from $206 in August to $169 in September, indicating a potential 18% decrease. This shift in market sentiment reflects the uncertainty surrounding Coinbase’s legal battles and the impact it may have on the company’s future.
Coinbase finds itself at the center of a legal storm, facing allegations of fraud and misrepresentation. The ongoing legal battle with the SEC and shareholders has not only impacted the exchange’s market value but also raised questions about the company’s integrity and compliance practices. As the legal proceedings unfold, Coinbase must navigate through these challenges to regain trust and stability in the cryptocurrency market.