Story Highlights
- Coinbase faces a new lawsuit alleging its business model is illegal and persuaded investors by offering unregistered securities.
- The plaintiffs seek full rescission of purchases, statutory damages, and injunctive relief, claiming tokens like Solana, Polygon, and others are unregistered securities.
- While battling legal troubles, Coinbase reported a strong financial rebound in Q1 2024, with $1.6 billion in revenue and $1.2 billion in net income.
A new class-action lawsuit filed in the U.S. District Court for the Northern District of California has added to Coinbase’s ongoing legal troubles. The plaintiffs, representing investors from California and Florida, allege that the leading cryptocurrency exchange’s business model is illegal and that it knowingly deceived investors into buying unregistered securities, violating state securities laws.
The complaints are made specifically regarding tokens like Solana (SOL), Polygon (MATIC), Near Protocol (NEAR), Decentraland (MANA), Algorand (ALGO), Uniswap (UNI), Tezos (XTZ), and Stellar Lumens (XLM). It is claimed that these are unregistered securities offered by Coinbase. The plaintiffs argue that Coinbase’s user agreement implicitly acknowledges its role as a “Securities Broker,” making the digital assets sold by the exchange investment contracts.
$COIN is facing a new class-action lawsuit for alleged investor deception.
— @TheLordofEntry (@thelordofentry) May 5, 2024
– Plaintiffs argue the exchange's business model is illegal and accuse Coinbase of selling unregistered securities.
– Cryptocurrencies cited include Solana, Polygon, Near Protocol, Decentraland,… pic.twitter.com/NYpVeND5Gf
Plaintiffs Seek Full Rescission, Statutory Damages, and Injunctive Relief
The complainants claim that Coinbase’s digital asset sales have violated securities regulations since the company’s inception. They are seeking full rescission of the purchases, statutory damages under state law, and injunctive relief through a jury trial.
This lawsuit mirrors similar claims in other cases where Coinbase has faced accusations of selling unregistered securities. The exchange has maintained that secondary sales of crypto assets do not meet the criteria for securities transactions, disputing the applicability of securities laws to its operations.
Ongoing Legal Battles and Financial Rebound
The new lawsuit is overseen against the background of Coinbase’s ongoing SEC lawsuit when the U.S. regulator also questions whether the tokens, purchased through the exchange, were securities. The complaint occurred shortly after a judge ruled in February that the regulator’s lawsuit could proceed, and the operator of the exchange filed an interlocutory appeal. Despite difficult legal issues, the first quarter of 2024 was very successful for Coinbase; the leader’s return to work has corrected the market and the launch of spot bitcoin-ETF. Indeed, the turnover of the cryptocurrency market exceeded $1.6 billion, the net profit of the company was $1.2 billion, and the adjusted EBITDA exceeded $1 billion.
As the legal proceedings continue, the outcome will have significant implications for Coinbase and the broader cryptocurrency industry. It will potentially redefine the regulatory landscape for digital asset exchanges and offerings.
