A coinbase shareholder has taken the exchange to court, alleging that he misled investors about the risks of bankruptcy and engaged in risky trading practices.
By 18 February trial Filed in the New Jersey Federal Court, the plaintiff Vanduo Guo claims that the coinbase failed to disclose that the customer’s property could be considered part of its bankrupt wealth, possibly abandoned retail users as unprotected creditors.
The plaintiff argued that when the coinbase deployed himself as a reliable patron, it reduced the significant risks associated with digital asset detention. The suit pointed to the collapse of more than 75 crypto exchanges before the coinbase became public in 2021, which left the customers without their money.
Despite repeated assurances from the company’s leadership, the suit says that the coinbase did not make much protection against such risks.
Beyond the concerns of bankruptcy, the lawsuit accused the coinbase of engaging in the ownership trade – using the property to use the company’s fund – without disclosing investors properly. Guo claims that it was a frustrated attempt to combat the falling crypto prices, exposing the firm to financial instability.
In addition, the complaint alleged that top coinbase officials, including coinbase CEO Brian Armstrong, made profits from insider knowledge, sold millions in stocks, finding out about the weaknesses of the company.
Other officers nominated in the complaint include co-founder Fred Ehrasam, CFO Alesia Has, COO Emily Choi, Chief Legal Officer Paul Grewal and Chief Accounts Officer Jennifer Jones. Several board members, including Fred Wilson, Mark Andresen, Kelly Kremer, Gokul Rajaram and Tobias Lutke, are also listed with former board members Catherine Hon.
The lawsuit also adds the troubles of the coinbase for 2023 cases of SEC against the company, alleging that it lists unregistered securities and operates without proper regulatory approval.
Guo argues that these growing legal and regulatory pressures jointly suffered adequate losses for the company’s shareholders with undisclosed internal risks. The lawsuit demands losses and governance reforms to prevent future malpractices and demand testing by jury.
As the press time, the coinbase has not issued an official statement. Crypto.news arrived out for comment but did not hear it back.
Coinbase legal crisis
In addition to the latest lawsuit, the coinbase is currently struggling with a class action in New York on violation of alleged securities. Earlier this month, an American judge ruled that the customers would have to face the lawsuit accusing the exchange of securities selling the coinbase illegally. The case originally rejected in 2023 was partially revived by an appeal court last year, allowing important allegations to proceed.
The New York case is not the only case related to securities that is facing a coinbase. In May 2024, customers from California and Florida filed a case against Exchange and CEO Brian Armstrong on similar allegations, identifying tokens such as protocols, divisionra, and algorand.
However, the fight of the coinbase with the SEC, which has been pulling for almost two years, may soon see a turn. On 14 February AdmissionThe SEC requested an additional 28 days to review the appeal of the coinbase, given that the newly established Crypto Task Force could play a role in ending the legal dispute.
Despite the legal troubles, the exchange reported a strong-to-the-off Q4 earnings in 2024, its revenue increased from 2023 to 138%.
