Coinbase faces new lawsuit over alleged investor deception

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As an analyst with extensive experience in the cryptocurrency industry and securities law, I find this new class-action lawsuit against Coinbase and its CEO Brian Armstrong concerning. This is not the first time the company has faced such allegations, which claim that Coinbase knowingly violated state securities laws by selling unregistered securities since its inception. The plaintiffs allege that various digital assets such as Solana (SOL), Polygon (MATIC), Near Protocol (NEAR), Decentraland (MANA), Algorand (ALGO), Uniswap (UNI), Tezos (XTZ), and Stellar Lumens (XLM) are securities.

As a legal analyst, I’d rephrase it as follows: I’m currently examining a new class-action lawsuit against Coinbase, the leading cryptocurrency exchange in the US by trading volume, and its CEO, Brian Armstrong. The plaintiffs, who are former customers, claim they were misled into purchasing securities, alleging that Coinbase’s business model was unlawful. This complaint mirrors a similar lawsuit the company has previously faced.

A legal action initiated by law firm Scott+Scott on behalf of plaintiffs Gerardo Aceves, Thomas Fan, Edwin Martinez, Tiffany Smoot, Edouard Cordi, and Brett Maggard from California and Florida, claims that Coinbase’s digital asset sales have been in breach of California securities laws since the company’s founding.

As a researcher, I have come across the plaintiff’s filing where they claim that Solana (SOL), Polygon (MATIC), Near Protocol (NEAR), Decentraland (MANA), Algorand (ALGO), Uniswap (UNI), Tezos (XTZ), and Stellar Lumens (XLM) fall under the category of securities based on their interpretation of relevant laws and regulations.

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Coinbase faces new lawsuit over alleged investor deception

As a researcher studying this legal dispute, I’ve discovered that the accusers argue Coinbase acknowledges its role as a “Securities Broker” in their user agreement. Consequently, they believe that the digital assets sold through the platform qualify as investment contracts or other securities. Additionally, the plaintiff alleges that Coinbase Prime, the exchange’s brokerage service, functions as a securities broker/dealer.

The plaintiffs are requesting three specific remedies in this lawsuit: the complete cancellation of the contract, damages according to state law, and an injunction that would be decided by a jury. This case shares similarities with another class action lawsuit, where Coinbase’s sale of securities is alleged to have caused harm to consumers.

Coinbase contested that the sale of secondary crypto assets did not qualify as securities transactions, challenging the applicability of securities regulations in this context. The court analyzed several factors and reversed certain rulings made by the lower courts, while maintaining others.

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A new lawsuit against Coinbase, different from its previous high-profile dispute with the SEC over the classification of tokens traded on the platform as securities, is currently underway. Coinbase has recently filed an interlocutory appeal following a judge’s ruling that allows the case to move forward.

On April 26, John Deaton, a crypto lawyer and Senate candidate, submitted an amici curiae brief to the U.S. District Court for the Southern District of New York in support of a request for an interlocutory appeal made on behalf of 4,701 Coinbase users.

In the first three months of 2024, I observed a robust recovery for Coinbase. This uplift was fueled by market improvements and the introduction of Bitcoin ETFs. The platform generated a total revenue of $1.6 billion during this period and reported net income of $1.2 billion. Moreover, they attained an Adjusted EBITDA figure of $1 billion, which signifies earnings prior to accounting for interest, taxes, deprepreciation, and amortization expenses.

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2024-05-05 12:32