U.S. Judge Approves Lawsuit by Shareholders
In what has been a landmark legal development, US District Judge Brian Martinotti of New Jersey gave the green light to Coinbase shareholders, led by Swedish pension fund Sjunde AP-Fonden, to go ahead with their lawsuit against the cryptocurrency exchange. The class-action suit accuses Coinbase and its top brass, including CEO Brian Armstrong, of misleading investors in downplaying the possibility of an SEC crackdown.
The securities class-action suit centers on them allegedly false representation concerning the potential material risks related to a civil enforcement action at the hands of the SEC, which has closely watched the crypto industry for compliance with securities laws.
Bankruptcy Risk and Misleading Statements
The decision by the judge further extends to the review of risk disclosures by Coinbase, especially with regard to what would have happened if the firm went bankrupt. Shareholders have held that the firm did not fully disclose to them the financial and operational risks it was facing, especially over the regulatory uncertainty surrounding its business.
The decision came just before Coinbase stock recorded an eight-day losing streak, compounded by weak crypto prices. According to analysts, the stock of the company may see a “risky pattern” as it slides through both regulatory and market challenges.
Cryptocurrency Exchange Coinbase Continues its Legal Battles
This order is the latest salvo in the continuing legal tussles between Coinbase and the SEC. In fact, the exchange had been involved in a number of lawsuits, including an SEC lawsuit filed this June. Notably, a federal judge in New York denied Coinbase’s attempt to have the SEC case dismissed earlier this year.
However, there have been some wins for the company in the courts. Them Chief Legal Officer Paul Grewal said a federal court had ordered the SEC to provide the exchange with crucial information to help defend itself. Furthermore, the case thrown at it by the SEC-that of Coinbase Wallet acting as an unregistered broker-dealer-was also thrown out.
Lobbying Efforts Amid Legal Turbulence
That hasn’t stopped Coinbase from being quite active on the political front, lobbying U.S. government regulators on crypto policy. The company has donated to PACs including Fairshake and hosted crypto-themed fundraisers for politicians.
Headed into November elections, Coinbase executives including Grewal have spoken optimistically about the future regulatory environment facing crypto. They say that there’s likely to be a digital asset-friendly Congress either way in this election.
A shareholder class-action lawsuit making its way through courts puts into sharp relief the increasingly knotty and shifting regulatory environment facing the crypto industry and its leaders. For its part, Coinbase remains in the thick of not only mounting a legal defense but working to shape future crypto regulations.
