Coinbase, the largest crypto exchange in the United States, has been hit with yet another multi-million dollar lawsuit. The exchange is facing charges over its digital trading technology, filed by a crypto company whose digital token offering resulted in a settlement with US securities regulators in 2019.
The Lawsuit Alleges several Coinbase Services Violate Blockchain Patent
Veritaseum Capital LLC filed the lawsuit in Delaware federal court on Thursday, claiming Coinbase infringed on a patent awarded to Veritaseum founder Reggie Middleton by the US Patent and Trademark Office last December. The patent was for a technology that enabled low-trust peer-to-peer value transfer
Veritaseum Capital claimed that several Coinbase services, including its blockchain infrastructure for transaction validation, violated the patent. It requested at least $350 million in damages from the court.
Coinbase, one of the world’s largest cryptocurrency trading platforms, did not respond to a request for comment on Friday.
Veritaseum Settled SEC Charges Related to its Crypto Token
Veritaseum previously issued the VERI token. Middleton and two of his Veritaseum entities paid the US Securities and Exchange Commission more than $9.4 million in 2019 to settle charges of a “fraudulent scheme” to sell the token in 2017 and 2018, including a $1 million penalty against Middleton himself.
The SEC accused them, among other things, of misleading investors about token demand and price manipulation. They agreed to the settlement without denying or admitting the underlying charges
Middleton and Veritaseum argued in a Brooklyn federal court earlier this year that they did not make any false statements, that the tokens were not securities, and that the trading at issue was “actually an effort by Mr. Middleton to test out a new online cryptocurrency exchange.“
According to its website, Veritaseum “creates blockchain-based, peer-to-peer capital markets as software on a global scale.” The lawsuit filed on Thursday explained that Coinbase’s website, mobile app, and Coinbase Cloud, Pay, and Wallet services infringe on a patent covering a secure method of processing digital-currency transactions.
Carl Brundidge of Brundidge Stanger, Veritaseum Capital’s attorney, said Friday that Coinbase was “uncooperative” when they tried to settle out of court.
Middleton and Veritaseum filed separate lawsuits against T-Mobile in 2020, alleging that the telecom company’s security flaws resulted in hackers stealing $8.7 million in cryptocurrency from them. T-Mobile denied the claims, and the case was sent to arbitration in August.