Coinbase Users File $5 Million Class Action Lawsuit

Three Coinbase users accuse the company of selling unlicensed securities. They are asking for at least $5,000,000 on behalf of themselves, all others who bought Dogecoin or Solana, Cardano, and more than 70 other tokens from the platform.

The users claim that Coinbase is selling securities (also called investment contracts), and should therefore have registered with SEC as a National Securities Exchange. This designation is usually reserved for stock exchanges and would mean that Coinbase would be subject to a host of reporting and regulatory obligations.

The suit was filed by Coinbase users claiming that they, along with everyone else who purchased the tokens, should be compensated for any trading losses and other unspecified damages. They claim that Coinbase violates both state and federal securities laws and they are asking for a judge to stop selling the tokens. The tokens include Chainlink and Polygon.

The lawsuit also names Brian Armstrong, CEO, as a defendant. It quotes a speech given by Gary Gensler, SEC Chairman, in which he likened the cryptocurrency to the Wild West and suggested that it was possible that exchanges such as Coinbase were selling unlicensed securities.

Although all of this could theoretically pose a threat to Coinbase’s operations, it is unclear how much attention the lawsuit will gain, particularly since similar lawsuits in the past have been dismissed. For instance, seven class-action lawsuits against cryptocurrency exchanges were dismissed by the courts last April or withdrawn by plaintiffs.

The new Coinbase class action suit is being led by a law company, as with many other securities law class actions. The firm announced late last year that they would file such a lawsuit and asked for Coinbase customers to be lead plaintiffs. This designation requires one to put their name on the case, and in return receive a larger payout if the defendant loses.

These types of lawsuits almost never reach trial and are often a gamble for law firms who seek to get a settlement. The settlement in these cases usually includes a large payment for lawyers and very little for customers who are not the victims of the suit.

The new lawsuit, regardless of its merits, highlights the legal exposure Coinbase is facing as a result its decision to list numerous tokens, despite the fact that the legal status of those tokens wasn’t clear. SEC officials suggested that Bitcoin, Ethereum, and other crypto-assets are not securities, but that they don’t have to be registered with them. Some of these tokens are clearly securities and others are in a gray area.

Coinbase declined to comment to the lawsuit.

Lawyers –

By: /s/ Steven L. Bloch
Steven L. Bloch
Ian W. Sloss
SILVER GOLUB & TEITELL LLP
184 Atlantic Street
Stamford, CT 06901
Tel: 203-325-4491
sbloch@sgtlaw.com
isloss@sgtlaw.com

By: /s/ Jordan A. Goldstein
Jordan A. Goldstein
Mitchell Nobel
SELENDY GAY ELSBERG PLLC
1290 Avenue of the Americas
New York, NY 10104
Tel: 212-390-9000
jgoldstein@selendygay.com
mnobel@selendygay.com

Attorneys for Louis Oberlander, Henry Rodriguez, and Christopher Underwood

from lawyers.buzz https://lawyers.buzz/coinbase-users-file-5-million-class-action-lawsuit/187/
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