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Coinbase to Face Class Action Lawsuit Over Alleged Securities Sales
A U.S. judge has ruled that Coinbase, a prominent crypto exchange, must face a class action lawsuit filed by customers in New York. The lawsuit alleges that Coinbase illegally sold securities and acted as a direct seller.
In a ruling delivered on February 7, U.S. District Judge Paul Engelmayer rejected Coinbase’s argument that it is not a statutory seller under U.S. federal securities law. The exchange contended that it never transferred the title of the 79 tokens listed in the lawsuit, which customers traded. However, the judge pointed to the argument that “customers on Coinbase transact solely with Coinbase itself,” leading to the conclusion that Coinbase was a seller.
Coinbase has reiterated that it “does not list, offer, or sell securities.” The exchange plans to fight to dismiss other claims in the case. This development comes more than nine months after a court decision in April 2024 revived aspects of the case that had previously been dismissed by Judge Engelmayer.
Background of the Case
The original lawsuit was filed in 2023, but Judge Engelmayer quashed it in February of the same year. However, an order from the 2nd U.S. Circuit Court of Appeals in Manhattan in April 2024 allowed certain accusations to stand. Judge Engelmayer’s latest ruling permits the parts of the case that the appellate court decided should proceed.
Similar Lawsuits and SEC Investigation
In May 2024, a group of Coinbase customers from California and Florida filed a new lawsuit against Coinbase and its CEO Brian Armstrong, alleging that the exchange’s crypto sales violated securities laws. The lawsuit identified several tokens, including Solana, Polygon, Near Protocol, Decentraland, and Algorand, as securities.
Aside from class action lawsuits, Coinbase continues to battle a separate lawsuit filed by the U.S. Securities and Exchange Commission (SEC). The SEC sued Coinbase in June 2023, alleging that the company operated as an unregistered securities exchange.
“Customers on Coinbase transact solely with Coinbase itself.”
Key Takeaways:
- Coinbase must face a class action lawsuit alleging the exchange illegally sold securities.
- The lawsuit identifies 79 tokens, including popular cryptocurrencies like Solana and Polygon.
- Coinbase maintains that it does not list or sell securities.
- The exchange is also facing a separate lawsuit from the SEC.
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