A recent report indicated that a federal judge has dismissed Coinbase’s motion to dismiss a proposed class action lawsuit by shareholders. The lawsuit alleges that Coinbase, the largest US crypto exchange, downplayed the possibility of being sued by the US Securities and Exchange Commission (SEC). The judge ruled that shareholders had provided enough evidence to suggest that Coinbase and its executives had defrauded them by painting a misleading picture of the likelihood of facing an SEC enforcement action. This legal battle began on May 10, 2023, when plaintiffs Sjunde AP-Fonden, Ryan R. Firth, and Zvia Steinmetz filed the class action lawsuit.
The lawsuit came just 15 months after the SEC filed a civil lawsuit against Coinbase on June 6, 2023, for allegedly operating an unregistered securities exchange. This legal action allowed shareholders to pursue claims that Coinbase had misrepresented the risk of customers losing their assets in the event of bankruptcy. Despite the judge’s dismissal of certain claims, CEO Brian Armstrong and other executives still face charges in the case. Coinbase responded to the ruling by stating that they remained confident in their position and looked forward to proving their case.
Following the SEC’s lawsuit against Coinbase, the company’s COIN shares experienced a significant decline of up to 22%. This decline led to multiple class action lawsuits from investors who felt deceived by Coinbase. Legal firms such as Bragar Eagel & Squire and Pomerantz LLP filed lawsuits against the exchange, accusing them of misleading the public about the extent of their compliance with regulations. In August 2023, Coinbase attempted to have the SEC’s lawsuit dismissed, but U.S. District Judge Katherine Polk Failla ruled in favor of allowing the case to proceed, marking a significant victory for the regulator.
Despite the legal challenges and negative news surrounding Coinbase, the research team at British bank Barclays decided to upgrade Coinbase’s shares from underweight to equal weight in September. However, Barclays analysts adjusted the price target for COIN shares from $206 to $169, suggesting an 18% decrease in value. This shift in market sentiment highlights the ongoing uncertainty surrounding Coinbase’s legal battles and the potential impact on its stock performance.
The legal battle faced by Coinbase demonstrates the complexities and risks associated with operating in the cryptocurrency industry. The outcome of these legal proceedings will not only impact Coinbase but also set precedents for how regulators and market participants interact in the evolving digital asset landscape.
