Coinbase Exchange Facing A Series of Lawsuits.
Several Lawsuits Have Been Filed Against the U.S cryptocurrency exchange Coinbase.
The cryptocurrency trading platform Coinbase Inc. in the United States faces many legal challenges. Yesterday, a legal firm in New York called Bragar Eagel & Squire made the announcement that it was going to sue Coinbase for making fraudulent representations about its business practices. Pomerantz LLP has also filed a complaint against the exchange, alleging that it is entitled to collect damages caused by the defendants’ breaches of the federal securities laws and to seek remedies. This litigation was initiated to recover damages.
In both suits, plaintiffs claim that the defendants made false and misleading claims about the Company’s business, operations, and compliance practices during the Class Period. Specifically, the suits stated that Coinbase failed to disclose that since the company stored client cryptocurrency in escrow, that cryptocurrency may be considered part of a bankruptcy estate, rendering it subject to bankruptcy proceedings in which Coinbase’s customers would be treated as the Company’s general unsecured creditors.
Furthermore, Coinbase refused to disclose that it enabled American citizens to exchange digital assets that—Coinbase understood and blithely ignored—required SEC registration as securities.
The preceding actions increased the likelihood that the company would be investigated by or face legal action from government agencies, yet it refused to disclose that. Thus, the Company’s public representations were always, to a considerable extent, false and misleading.
SEC and Coinbase
This comes after the SEC voiced its suspicions that Coinbase has been claiming to operate as an unregistered securities exchange, which is invalid.
Coinbase has been involved in a number of litigation and controversial situations in the past. According to Bragar Eagel & Squire, the share price of Coinbase (COIN) dropped by more than 21 percent when news broke about the company’s interactions with the Securities and Exchange Commission (SEC).
Coinbase CEO and founder Brian Armstrong said:
“We should have updated our retail terms sooner, and we didn’t communicate proactively when this risk disclosure was added. My deepest apologies, and a good learning moment for us as we make future changes.”