Crypto exchange Coinbase has been in the news a lot lately, both for good and bad. It has announced the launch of a new asset called Coinbase Wrapped Staked ETH ahead of the upcoming Ethereum merge, as well as the launch of a voter registration and education initiative. Recently, however, it was also hit with two separate class-action lawsuits, each alleging the company made “false and misleading statements” regarding the nature of its operations.
The suits claim investors suffered losses as a result of the bankruptcy clause in Coinbase’s SEC filing as well as a report of an SEC probe into the company. The SEC probe concerns the claim that Coinbase offered trading services for crypto assets that should have been registered as securities.
The aforementioned report, released in July by Bloomberg, notes that Coinbase is facing an SEC investigation over allegedly listing unregistered securities. It points out that the price of Coinbase's shares fell by more than 26% on the first occasion, and an additional 21% on the second, causing substantial damage to investors—and both class action suits naturally reference this fact.
Coinbase’s recently announced deal with BlackRock, however, in which the $20 trillion asset manager will expand its institutional trading services to include crypto, took the price of Coinbase shares as high as $106.20 in early August.
The first of the class action suits was filed by Bragar Eagel & Squire in the U.S. District Court of New Jersey, while the second was filed by the San Diego-based Robbins Geller Rudman & Dowd LLP.
Both suits claim that Coinbase “knew or recklessly disregarded” the fact that the crypto assets it held should be registered as securities and could also potentially be subject to bankruptcy proceedings—proceedings in which the customers of Coinbase’s exchange would be treated as general unsecured creditors.
Coinbase, for its part, disclosed in its 10-Q filing submitted on May 10 that the crypto assets it held “may be considered to be the property of a bankruptcy estate.”
Coinbase’s chief legal officer, Paul Grewal, said in July that the SEC has already reviewed its listing process, ensuring that securities are kept off its trading platform, and the company has repeatedly denied it has listed securities on its platform.