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Coinbase shareholder Wenduo Guo has sued the crypto exchange and its top executives for allegedly violating securities laws.
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Coinbase and several of its executives have been hit with a shareholder lawsuit alleging they misled investors about its risk of bankruptcy and violated securities laws.
The complaint, filed in a New Jersey federal court on Feb. 18 by Coinbase shareholder Wenduo Guo, alleged that Coinbase and its leadership failed to disclose that customer assets could be considered part of Coinbase’s bankruptcy estate, making retail customers unsecured creditors.
The lawsuit claimed Prior to Coinbase’s public listing in April 2021, at least 75 cryptocurrency exchanges collapsed, which left those customers unable to recover their digital assets.
“Despite repeated statements by Company management to the contrary, Coinbase was no different with respect to the risk of digital asset loss in the event of bankruptcy.”
The complaint also claimed that Coinbase failed to disclose that it engaged in proprietary trading in order to compensate for declining crypto prices, which the suit claimed was “a risky practice involving trading assets using the Company’s money.”
Guo’s lawsuit also pointed to the Securities and Exchange Commission’s June 2023 lawsuit against Coinbase, alleging that the company listed unregistered securities and failed to register with the agency.
An excerpt of the complaint filed against Coinbase and its executives. Source: PACER
The suit alleged that executives, including CEO Brian Armstrong — who was named in the suit — sold millions in stock and made hundreds of millions in personal profits.
Related: SEC asks for 28 more days to respond to Coinbase’s appeal
Guo claimed these actions led to substantial losses, regulatory penalties, lawsuits, and reputational damage for Coinbase.
The complaint demanded a trial by jury and is seeking damages and corporate governance reforms to prevent similar misconduct.
The suit also names co-founder Fred Ehrsam, financial chief Alesia Haas, operating chief Emilie Choi, legal chief Paul Grewal, accounting head Jennifer Jones, along with board members Fred Wilson, Mark Andreessen, Kelly Kramer, Gokul Rajaram and Tobias Lütke, as well as former board member Kathryn Haun.
Meanwhile, Coinbase is facing another class-action lawsuit in New York for allegedly selling securities without registering as a broker-dealer.
Magazine: Coinbase and Base: Is crypto just becoming traditional finance 2.0?
This article first appeared at Cointelegraph.com News
