By Shelly Melancon (Switzerland)
US-based cryptocurrency exchange, Coinbase is the subject of a lawsuit initiated by one of its shareholders in light of its recent NASDAQ listing. The plaintiff, Donald Ramsey claims that Coinbase misled its investors and shareholders on the true state of things before its April listing. With the public listing, Coinbase became the first crypto firm to go public.
Following the approval of its IPO by the US Securities and Exchange Commission (SEC), Coinbase debuted on NASDAQ with over 114 million shares of its Class A common stock. Coinbase’s public listing attracted a lot of attention and also set the pace for other potential listings from stock and crypto trading platform Robinhood, Binance and USDC’s Circle.
Coinbase’s Partners and VCs Added to Lawsuit
The lawsuit called for other shareholders to join the class action if they were interested. Plaintiff Donald Ramsey added some of Coinbase’s executives including CEO and Chief Legal Officer, Brian Armstrong and Paul Grewal, respectively. Several of Coinbase’s VCs and partners were also included in the suit.
According to the plaintiff, Coinbase misrepresented the true position of things when the exchange was about to get publicly listed. Speaking of misrepresentation, after the public listing, it announced in May that it wanted to pool $1.25 billion from the sale of bond offerings, which was only a month after listing. Coinbase’s NASDAQ direct listing was an indication that it didn’t need to pool funds nor issue new shares. Announcing the sale of a bond offering a month after listing publicly was suspicious.
Also read:Amid the class action and some other technical issues Coinbase shares price plunged to $225 as of the time of writing, representing a -10% price decline. Coinbase is not native to lawsuits. Last month, the crypto exchange had a lawsuit initiated against it by traders who had their accounts suspended. One of them claimed that as soon as he made a deposit to his Coinbase account, it was suspended. The plaintiffs filed $5 million for damages.
Binance Exchange Faces Class Actions for Negligence
Class actions seem to be a common pattern nowadays, even as there are no definite regulations on cryptocurrencies. It remains to be seen how these lawsuits can yield results since the courts may not have regulations to resort to while deciding on the cases.
Leading crypto exchange, Binance also cited as a defendant in another class action back in June. A group of Italian Futures traders alleged that Binance was responsible for losses incurred on its Futures platform in February. Furthermore, they said they were unable to access their accounts due to a downtime. According to the plaintiffs, Binance had offered an inadequate compensation plan, hence the lawsuit.
As regulatory pressure on these exchanges increase and they are able to register their operations with relevant bodies, users will be protected against events like this. It is one of the reasons Robinhood has been unable to launch its IPO as it is still under investigation by the US SEC. Robinhood was also fined $70 million by FINRA for causing harm to its customers, especially during the bull run in March.
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