Coinbase cryptocurrency exchange and its CEO, Brian Armstrong, are facing a new lawsuit from a group of plaintiffs from California and Florida alleging that they were deceived into purchasing unregistered securities.
This is not the first of Coinbase’s legal hurdles following the United States Securities and Exchange Commission (SEC) lawsuit from mid-2023.
Lawsuit Alleges Coinbase Sold Unregistered Securities
The new class action lawsuit was filed in the United States District Court for the Northern District of California, San Francisco Division. The plaintiffs include Gerardo Aceves, Thomas Fan, Edwin Martinez, Tiffany Smoot, Edouard Cordi, and Brett Maggard.
The lawsuit contends that Coinbase exchange acknowledged in its user agreement that it operated as a securities asset broker. In addition, the plaintiffs claimed that Coinbase Prime brokerage was highlighted as a securities broker.
However, despite this acknowledgment, it continued to provide access to assets such as Solana (SOL), Polygon (MATIC), Near Protocol (NEAR), Decentraland (MANA), Algorand (ALGO), Uniswap (UNI), Tezos (XTZ), and Stellar Lumen (XLM), which the lawsuit claims are unregistered securities.
The plaintiffs are pursuing complete rescission, statutory damages under state law, and injunctive relief via a jury trial.
Coinbase Faces Legal Battles on Multiple Fronts
This recent lawsuit differs from Coinbase’s widely discussed legal dispute with the SEC, which also raises questions about whether tokens offered on the exchange should be categorized as securities. Notably, the firm recently lodged an interlocutory appeal in response to a judge’s ruling permitting the case to proceed.
John Deaton, a cryptocurrency lawyer engaged in an election campaign to challenge Senator Elizabeth Warren at this time, recently stepped in to support Coinbase.
In an April 26 submission to the U.S. District Court for the Southern District of New York, Deaton submitted an amicus brief endorsing a motion for interlocutory appeal on behalf of 4,701 Coinbase clients.
In a separate matter, numerous Coinbase customers have initiated legal action against the company concerning its management of the GYEN stablecoin, which they assert was anything but stable. According to this lawsuit, Coinbase actively promoted and traded the GYEN token despite knowing its high volatility, resulting in major losses for investors.
Furthermore, Coinbase’s crypto staking has attracted regulatory concerns. The SEC contends that it is an unregistered investment contract and security. Several states within the U.S. have joined the SEC’s lawsuit, alleging that Coinbase breached securities laws in relation to its staking rewards program.
