Coinbase Faces New Lawsuit for Selling Unregistered Securities
Coinbase Exchange is facing a lawsuit regarding the issue of deceiving investors. The lawsuit in question has purported that the various cryptocurrencies listed on the platform such as Solana, Polygon, Decentraland, Uniswap, Stellar Lumens, Algorand, Near protocol, and Tezos are securities. The class-action lawsuit is directed towards Coinbase CEO Brian Armstrong and the trading platform.
Allegation Against Coinbase
The plaintiffs have alleged that the firm deceived the investors for buying securities and have claimed that the business model of the firm is illegal. The case was filed at the Northern District Court of San Francisco, California.
Some of the plaintiffs in the case are Gerardo Aceves, Edwin Martinez, Tiffany Smoot, Thomas Fan, Brett Maggard who hail from California and Florida.
The lawsuit intends to put the firm on trial for allegedly letting investors purchase securities while knowingly violating the securities laws of the state. The lawsuit has also purported that various digital assets such as $Sol, $Matic, $Mana, $Algo, $Uni, $XLM and $Near are securities.
The lawsuit also claimed that Coinbase has admitted for operating as a security brokerage in the user-agreement. On this ground, the litigants intend to prove that the tokens listed on the platform constitute as securities or investment contracts.
Coinbase Faces Class-Action Lawsuit for Operating as a Security Broker
The lawsuit further claims that Coinbase Prime brokerage is dealing in securities. The plaintiffs have called for a full rescission and intend to qualify for statuary damages under the law in order to receive injunctive relief via a jury trial. This lawsuit is fashioned after another class-action lawsuit against Coinbase that alleged the firm of dealing in securities.
Coinbase lawyers have defended their position by noting that the secondary cryptocurrency sales do not suffice the security sales. The defendants also brought various arguments against the relevance of security regulations. This current lawsuit against Coinbase is different from a highly publicized case against the firm where the exchange is embattled against the SEC.
The lawsuit against the federal regulator also grapples with the question whether the tokens listed on Coinbase are securities or not.
Meanwhile, Coinbase has filed for an interlocutory appeal against the decision of the judge that allows the lawsuit to remain active. On 26th April, John Deaton filed an amicus brief in support of Coinbase at the Southern District Court of New York. This filing gave strength to the interlocutory appeal filed by the trading platform on behalf of 4701 Coinbase account holders.
BlockFi and Coinbase Working on Fund Distribution After Shutting Down Web Forum
Another Cointelegraph article reported that Coinbase is working with crypto lending firm BlockFi. The lending protocol filed for a bankruptcy and intends to shut down its web forum in May. On this account, the lending protocol signed a partnership contract with Coinbase in order to allow BlockFi clients to withdraw their funds.
The firm claimed in a recent blog post that it is working with Coinbase to allow eligible BlockFi Interest Accounts (BIA), Private Clients, and Retail Loans to withdraw their funds. In November 2022, BlockFi filed for a bankruptcy proceeding in the aftermath of the FTX demise.
In 2023, the firm announced closure and shared the plans to reimburse customer funds with a deadline set on 28th April 2024.
BlockFi operators told consumers on 9th May that after the last date to withdraw their funds, the account holders with outstanding holdings will receive instructions to sign-up for a Coinbase account in order to make withdrawals.
The qualified users will be able to use current or new Coinbase account to access their funds on BlockFi. However, the clients who do not have a registered Coinbase account will have to liquidate their assets in cash and distribute, accordingly. The administrators of BlockFi will continue to work with Coinbase to enable distribution rounds such as funds recovery from FTX. The firm has notified users that it is not working with any other third-party entities.
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