Coinbase shareholder lawsuit against exchange to proceed
A New Jersey court judge deemed a lawsuit against Coinbase over its portrayal of an eventual regulatory crackdown acceptable.
Late on Sept. 5, U.S. District Judge Brian Martinotti ruled that Coinbase shareholders had the right to sue the crypto exchange for its misleading stance on the Securities and Exchange Commission’s launch of a civil complaint.
The class action lawsuit, directed by Swedish pension fund Sjunde AP-Fonden, alleged that Coinbase, its CEO Brian Armstrong, and other company executives failed to fairly represent the likelihood of an SEC enforcement action.
Judge Martinotti also ruled that shareholders had grounds to scrutinize the firm’s risk disclosures in the event of a bankruptcy filing.
The ruling was issued shortly before Coinbase stock posted an eight-day loss streak. A crypto.news market analyst noted that COIN shares formed a “risky pattern” amid weak crypto price performance.
Coinbase juggles legal conundrums
Martinotti’s disapproval of Coinbase’s motion to dismiss marked another partial loss tied to the firm’s ongoing tussle with the SEC. In March, a federal judge in New York rejected the firm’s appeal to dismiss an SEC civil lawsuit from June 2023.
However, the firm has also made progress in court. According to Coinbase CLO Paul Grewal, Judge Katherine Polk Failla ordered the SEC to share information needed for the exchange’s defense. A court also rejected the SEC’s claim that Coinbase Wallet was an unregistered broker-dealer.
Meanwhile, the company has been active in lobbying throughout the U.S. election, whether through direct donations to super PACs like Fairshake or facilitating crypto fundraisers for candidates. Grewal also told Bloomberg that a pro-crypto Congress was all but certain, regardless of the outcome of the November presidential elections.
