Regulation

Investors sue Coinbase for ‘knowingly’ violating securities laws

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A group of investors has filed a class action lawsuit against Coinbase, the popular US-based cryptocurrency exchange. They allege that the company offers and sells unregistered securities and investments to its customers.

The lawsuit was filed in the Northern District of California. It names Coinbase Global Inc. and its CEO, Brian Armstrong, as defendants.

Plaintiffs allege certain tokens available on Coinbase as securities

The plaintiffs allege that Coinbase operated as an unlicensed broker-dealer since its creation. They also claim that it offers and sells a wide range of digital assets, considered securities under California law.

The lawsuit lists a long list of tokens considered digital securities. This includes Algorand (ALGO), Close protocol (NEAR), Polygon (MATIC), Uniswap (UNI), Solana (GROUND), and many more.

Learn more: What is the Howey test and how does it impact cryptography?

Additionally, the plaintiffs allege that Coinbase “knowingly and willfully” violated California securities laws by failing to register as a broker-dealer and register the securities it offered. Additionally, they claim that Coinbase actively promotes these digital assets through its website, social media, and traditional advertising. Even Super Bowl Ads were used to encourage customers to invest there.

“No use cases other than investing have ever been offered by Coinbase to Plaintiffs or the Class (there are no other use cases for them) and Coinbase continues to issue newsletters to this day. investment and similar updates to Plaintiffs and Class Members. Indeed, the Coinbase website publishes a “weekly market commentary” and, as of April 15, 2024, Coinbase still states that “investors have several ways to gain exposure to the market.” [investment in crypto],'” according to complaint.

The lawsuit seeks the complete reversal of all digital asset transactions made on the Coinbase platform. Additionally, he seeks injunctive relief and statutory damages.

Notably, this lawsuit comes after the United States Securities and Exchange Commission (SEC) filed a lawsuit against Coinbase Last year. The commission alleges that Coinbase engaged in the sale of unregistered securities. The situation worsened in March 2024 when the court rejected Coinbase’s attempted dismissal the lawsuit, thereby positioning the SEC favorably in this ongoing legal battle.

This new development could have serious consequences implications for Coinbase and the crypto industry in general. Coinbase could face significant penalties and damages if found guilty of selling unregistered securities. Additionally, this case could set an important precedent for the regulation of cryptocurrencies in the United States.

Learn more: Best Coinbase Alternatives in 2024 for Crypto Trading

It is important to note that the allegations contained in this lawsuit are only accusations. The crypto exchange has not yet had the opportunity to defend itself in court. However, this lawsuit poses a significant challenge for the company and could have a significant impact on its future.

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