Lawyer may sue Coinbase, Robinhood for securities law violations
Leading securities lawyer Tom Grady is reportedly preparing to file a lawsuit on behalf of retail investors against top U.S. crypto exchanges Coinbase, Robinhood, and others.
According to reports, Grady alleges that these exchanges have violated state and federal securities laws by transacting unregistered digital coins and misled investors by not providing proper disclosures about the risks associated with trading and owning such coins.
Exchanges are under fire
The move follows Grady’s investigation into these exchanges’ operations and their potential violations of securities laws.
Grady’s law firm CryptoLawyers.org based in Tampa, Florida, also seeks clients who suffered losses purchasing cryptocurrencies on these platforms to share information about their investments.
The debate over how to classify digital assets has raged for a long time. In 2017, the Securities and Exchange Commission (SEC) took action against several crypto companies for selling unregistered securities.
SEC Chairman Gary Gensler has previously suggested that the majority of crypto tokens are securities, with the exception of bitcoin. Last year, the SEC charged executives of Ripple, a digital cross-border payment firm, with selling the XRP token to help build out its platform.
The SEC also filed lawsuits against cryptocurrency exchanges Gemini and Kraken for the sale of unregistered securities products to customers last month.
Potential regulatory crackdown in the crypto space
A class-action lawsuit could result in a regulatory crackdown on the $1 trillion cryptocurrency industry, which has already seen its value plummet and has been rocked by scandals. The price of bitcoin has dropped more than 50% from its all-time high in November 2021.
On March 9, troubled cryptocurrency bank Silvergate announced that it is liquidating assets and ceasing operations, which has further depressed the prices of cryptocurrencies.
The industry has also seen high-profile companies filing for bankruptcy, such as FTX, which was recently indicted for allegedly running a Ponzi-like scheme through its crypto exchange before its implosion and bankruptcy.
Unlike FTX, Coinbase and Robinhood are U.S.-based publicly traded companies that are required to meet SEC disclosure requirements. Grady, on the other hand, contends that by facilitating transactions in digital coins, which are essentially unregistered securities, the exchanges are key participants in securities law violations.