Significant developments continue in the cryptocurrency market regarding legal regulations. Accordingly, the US-based cryptocurrency exchange Coinbase and its CEO Brian Armstrong are facing a new class action lawsuit alleging that investors were misled about purchasing securities and that the company’s business model is illegal.
US Agenda: Coinbase
Plaintiffs from California and Florida, represented by Gerardo Aceves, Thomas Fan, Edwin Martinez, Tiffany Smoot, Edouard Cordi, and Brett Maggard, have filed a lawsuit in the United States District Court for the Northern District of California, San Francisco Division, claiming that Coinbase knowingly conducted crypto asset sales. According to the lawsuit file, the company has been violating state securities laws since its inception. The lawsuit claims that crypto assets such as SOL, MATIC, NEAR, MANA, ALGO, UNI, XTZ, and XLM are securities.
The plaintiffs allege that Coinbase’s user agreement admits the exchange acts as a Securities Broker dealing in crypto asset securities sold as investment contracts or other securities. They also claim that Coinbase Prime brokerage is a securities broker.
The plaintiffs are demanding a full cancellation through a jury trial, legal damages under state law, and a preliminary injunction. This lawsuit resembles another class action alleging consumer harm resulting from Coinbase’s securities sales. Coinbase has defended that secondary crypto asset sales do not meet the criteria for securities transactions and has contested the appropriateness of securities regulations.
What’s Happening at Coinbase?
This new lawsuit differs from Coinbase’s well-publicized legal battle with the US Securities and Exchange Commission, which also questions whether tokens sold at Coinbase should be classified as securities. Coinbase recently responded to a judge’s decision allowing the case to proceed by filing an interlocutory appeal.
Crypto attorney John Deaton, currently running an election campaign to remove Senator Elizabeth Warren, submitted a friend-of-the-court briefing supporting his interlocutory appeal in the US District Court for the Southern District of New York on April 26.
Coinbase reported a strong recovery supported by an increase in market performance and the launch of spot Bitcoin exchange-traded funds in the first quarter of 2024. The exchange achieved total revenue of $1.6 billion and net income of $1.2 billion in the first quarter, resulting in $1 billion in earnings before interest, taxes, depreciation, and amortization.
