Basri Caneri 
US-based cryptocurrency exchange Coinbase and its top executives are facing a lawsuit filed by shareholders. The lawsuit alleges that the company misled investors about the risk of bankruptcy and violated securities laws.
Allegations Against Coinbase: Are Customer Funds at Risk in Bankruptcy?
The lawsuit, filed by Coinbase shareholder Wenduo Guo in New Jersey federal court on February 18, alleges that Coinbase failed to inform investors that customer assets could be considered assets of the company in the event of bankruptcy.
The lawsuit includes the following statements:
- Coinbase management made misleading statements that customer assets would be protected in the event of bankruptcy.
- The exchange made high-risk trades using its own funds and hid this from investors.
In particular, it is claimed that at least 75 cryptocurrency exchanges collapsed before April 2021, when Coinbase went public, and that Coinbase had similar risks, but this was hidden.
SEC Lawsuits and Executives Selling Shares
The lawsuit also references the US Securities and Exchange Commission’s (SEC) June 2023 lawsuit against Coinbase. The SEC alleged that Coinbase sold securities without registering and failed to register as a broker-dealer.
The complaint also alleged that Coinbase CEO Brian Armstrong and other executives sold millions of dollars of shares and personally earned hundreds of millions of dollars.
Among the names charged in the case:
- CEO Brian Armstrong,
- Co-founder Fred Ehrsam,
- Alesia Haas, Chief Financial Officer,
- Emilie Choi, Chief Operating Officer,
- Legal Director Paul Grewal,
- Accounting Manager Jennifer Jones and
- Board members include Fred Wilson, Mark Andreessen, Kelly Kramer, Gokul Rajaram and Tobias Lütke.
Kathryn Haun, a former member of the company’s board of directors, is also named in the lawsuit.
Other Lawsuits Against Coinbase
Coinbase is also facing another class action lawsuit in New York for allegedly selling unregistered securities. The company continues to struggle with regulatory pressure in the US, creating uncertainty for investors.
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