Coinbase Dragged into a Class Action Lawsuit by Angered Customers

American digital currency trading platform, Coinbase Global Inc has been dragged into a Class Action lawsuit by three of its customers for not providing the appropriate disclaimers to 79 tokens they traded on the platform. According to the three plaintiffs,  Louis Oberlander, Henry Rodriguez, and Christopher Underwood, Coinbase sold 79 tokens that met the definitions of securities but did not provide the appropriate risk disclosures.

The Plaintiffs named Coinbase Global Inc, Coinbase Inc, and Brian Armstrong as the defendants in the lawsuit and represented by Connecticut law firm Silver Golub & Teitell. According to the details of the lawsuit, Coinbase was indicted for being the “actual seller” when exchange takes place, crediting and debiting the parties involved in the transaction in its accounts, rather than facilitating direct exchange between those parties.

Tokens Under Review and Demands

The tokens that are the subject of the lawsuit include but are not limited to 1INCH, AAVE, ACH, ADA, AGLD, ALGO, AMP, ANKR, ARPA, and ATOM respectively.

“Coinbase has used this platform to buy from and sell to customers 79 different digital assets at issue in this action. But what Coinbase has not disclosed is that the Tokens are in fact securities, and Coinbase is selling these securities despite the fact that there is no registration statement in effect for these securities and despite the fact that Coinbase has refused to register either as a securities exchange or as a broker-dealer,” the filing reads, adding that 

“Because Coinbase’s sale of these tokens violates both federal and state law, Plaintiffs, individually and on behalf of all persons or entities who transacted in the Tokens on the Coinbase Platform bring claims to recover damages, consideration paid for Tokens, and trading fees, together with interest thereon, as well as attorneys’ fees and costs, to the fullest extent permitted by law.”

Securities focused lawsuits are not uncommon in the digital currency ecosystem with the most pronounced being that from the United States Securities and Exchange Commission (SEC), and blockchain payments firm, Ripple Labs Inc. While the SEC is known to extend the powers of the law to demand accountability from crypto firms, exchanges have been spared in the more than a decade that the industry has been existing for. 

While mainstream regulators have spared trading platform, users have not as Non-Fungible Token (NFT) trading platform, OpenSea has also been sued by a user whose Bored Ape Yacht Club (BAYC) token was snapped up for just 0.01 ETH (approximately $26) without his permission.