Coinbase, a prominent crypto exchange, and its CEO, Brian Armstrong, are facing a new class-action lawsuit alleging deception of investors into purchasing securities and operating an illegal business model.
The lawsuit, filed in the United States District Court for the Northern District of California San Francisco Division, represents plaintiffs from California and Florida, alleging that Coinbase’s digital asset sales have violated state securities laws since its inception.
Plaintiffs claim that tokens such as Solana (SOL), Polygon (MATIC), Near Protocol (NEAR), Decentraland (MANA), Algorand (ALGO), Uniswap (UNI), Tezos (XTZ), and Stellar Lumens (XLM) are securities. They argue that Coinbase, by admitting to being a “Securities Broker” in its user agreement, sold digital asset securities as investment contracts or other securities.
The plaintiffs seek full rescission, statutory damages under state law, and injunctive relief through a jury trial.
Coinbase has disputed the relevance of securities regulations, arguing that secondary crypto asset sales did not meet securities transaction criteria. This lawsuit is distinct from Coinbase’s ongoing legal battle with the U.S. Securities and Exchange Commission, which questions the classification of tokens sold on the platform as securities.
John Deaton, a crypto lawyer and current election candidate aiming to unseat Senator Elizabeth Warren, filed an amicus brief in support of a motion for interlocutory appeal on behalf of 4,701 Coinbase customers.
Despite legal challenges, Coinbase reported a strong rebound in the first quarter of 2024, with total revenue reaching $1.6 billion and net income at $1.2 billion. The exchange achieved $1 billion in adjusted earnings before interest, taxes, depreciation, and amortization, supported by market performance and the launch of spot Bitcoin exchange-traded funds.
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