Regulation
Six Coinbase customers claim exchange violates securities laws in new lawsuit
Six Coinbase customers deposit a new class action lawsuit against crypto exchange Coinbase Global, two subsidiaries – Coinbase, Inc. and Coinbase Asset Management, LLC. — and its CEO, Brian Armstrongon May 5.
The lawsuit alleges that digital assets listed on Coinbase are securities. This includes Solana (GROUND), Polygon (MATIC), Close Protocol (CLOSE), Decentralized country (MANA), Algorand (ALGO), Uniswap (United), Tezos (XTZ), and Stellar (XLM). The plaintiffs argue that these tokens constitute “investment contracts,” subject to state securities laws.
Coinbase itself admits to being a “broker-dealer” in its user agreement, according to the lawsuit. As a result, the defendants “knowingly, intentionally, and repeatedly violated the state’s securities laws” and deceived their users, according to the lawsuit filed in the U.S. District Court for the Northern District of California, Division of San Francisco.
The lawsuit further notes:
“His (Coinbase’s) entire business model was built on a lie and a dream: the lie is that ‘we don’t sell securities,’ and the dream is that, knowing he would eventually be caught in the lie, “It’s better to ask for forgiveness rather than permission.
The lawsuit was filed by plaintiffs Gerardo Aceves, Thomas Fan, Edwin Martinez, Tiffany Smoot, Edouard Cordi and Brett Maggard of California and Florida. The plaintiffs are seeking total rescission, meaning cancellation of their purchase contracts, as well as statutory damages under state law and an injunction.
Coinbase is already battling a lawsuit from the U.S. Securities and Exchange Commission (SEC), which alleges the exchange violated securities laws. Coinbase argues that the secondary sale of crypto assets does not constitute securities. The exchange filed an interlocutory appeal after a judge allowed the SEC lawsuit to continue.
Late last month, a pro-XRP lawyer John Deaton filed an amicus brief in support of a motion for interlocutory appeal on behalf of 4,701 Coinbase customers. Deaton is currently running a campaign against Senator Elizabeth Warren.
Earlier this week, Coinbase reported a overvoltage in its first quarter revenue, which exceeded expectations at $1.64 billion. The exchange’s trading revenue nearly tripled to $1.07 billion, with consumer trading revenue alone climbing to $935 million, a doubling from the previous year.