Coinbase Dragged in Class Action Lawsuit Over Securities Offering

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Brian Armstrong, the CEO of Coinbase, a popular cryptocurrency exchange is currently being sued, alongside the trading platform for allegedly deceiving investors and operating an illegal business model.

Gerardo Aceves, Thomas Fan, Edwin Martinez, Tiffany Smoot, Edouard Cordi, and Brett Maggard are the plaintiffs from California and Florida, seeking legal action against Coinbase.

The class action lawsuit from these customers alleged that tokens like Solana, Polygon, Near, Decentraland, Algorand, Uniswap, Tezos, and Stellar lumens are classified as securities, which has raised concerns about the exchange practices. It also accuses it of misleading investors and engaging in activities that violate regulations.

The lawsuit, filed in a San Francisco Court claims that the exchange violated state securities laws by knowingly conducting illegal digital asset sales since its establishment.

Token classification controversy 

The claimant argued that Coinbase acknowledged “Securities Broker” as its role as well as its user agreement also, prime brokerage falls under the category of a securities broker.

This admission implies that the digital assets sold by the digital currency exchange are considered investment contracts or other securities, they claimed.

This lawsuit is similar to another case where a group of people alleged that Coinbase’s sale of securities has harmed consumers.

The complainants are seeking complete cancellation, damages as prescribed by state law, and a court order to stop the alleged harm.

However, the leading trading platform has mounted a defense that the sale of secondary crypto assets doesn’t meet the criteria for securities transactions and has also disputed the relevance of securities regulations in these cases.

Coinbase’s Legal Saga

This legal action adds to the ongoing challenges the digital exchange faces in the ever-evolving world of cryptocurrencies.

Last year, it the industry spectated over Coinbase vs SEC lawsuit. This case was centered on regulatory issues in the cryptocurrency industry which raised clarifying questions about whether tokens sold on coinbase are securities. The trading platform was displeased with the Judge’s decision to continue with the case, so an interlocutory response was filed to challenge the decision.

As a show of support, on April 26, the crypto lawyer John Deaton filed an amicus brief to support the motion on behalf of Coinbase’s 4,701 customers.

Amid the legal saga, Coinbase made a great comeback in the first quarter of 2024 that surpassed its 2023 entire earnings. It saw a boost in the market as it served as a custodian for many of the launched spot Bitcoin exchange-traded funds. A total revenue of $1.6 billion and a net income of $1.2 billion was made during that time. In all, the trading platform reached $1 billion in adjusted earnings before interest, taxes, depreciation, and amortization.

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