Class action lawsuit by coinbase users
The US District Court for the Southern District of New York has dismissed a class action lawsuit against the crypto asset (virtual currency) exchange Coinbase on the 1st. The company’s stock price rose 24% after the lawsuit was dismissed.
The lawsuit was filed in March 2022 by three Coinbase user plaintiffs. It claims that Coinbase sells unregistered securities and seeks compensation for damages incurred in trading those tokens.
Relation: Claimed to sell class action unregistered securities to US coinbase
Court Judge Paul Engelmayer dismissed the motion because the plaintiffs failed to prove that Coinbase was a “direct seller” or “has an ownership interest in” the cryptocurrency.
The judge ruled that Coinbase did not play a direct role in the transaction. At that time, he mentioned the User Agreement.
Coinbase’s User Agreement clearly states that when users transact on Coinbase, Coinbase acts as an intermediary to facilitate transactions between buyers and sellers. It also states that the ownership of the cryptocurrency remains with the user and is not transferred to Coinbase at any time.
The judge noted that the text of these regulations was inconsistent with plaintiffs’ allegations.
The plaintiffs also allege that Coinbase “deliberately emphasized the value of cryptocurrencies” and promoted cryptocurrencies, including participating in “airdrops.”
Coinbase is said to have attempted to promote token sales by providing information on virtual currencies that can be purchased on its platform, such as “explanation of each token and its intended value” and “links to news articles about tokens.” It is the shape that was used. The judge also dismissed this.
A judge ruled that the plaintiffs were barred from reapplying in the Southern District of New York. Plaintiffs can, however, resue in state-level courts.
What is airdrop
Free distribution of virtual currency (tokens). There are many cases where the purpose is marketing, such as raising awareness of virtual currency. Airdrops may also occur when the blockchain hard forks and a new virtual currency is born.
Class action lawsuits over information disclosure
Coinbase faces other class action lawsuits. Two lawsuits were filed in August 2022, both claiming that “Coinbase’s disclosure of information was inappropriate” and “handling unregistered securities.”
Regarding information disclosure, if Coinbase were to go bankrupt, “the cryptocurrencies deposited by users on the platform will also be subject to bankruptcy proceedings, and users may be treated as general unsecured creditors.” It is problematic that it was not disclosed until recently.
Coinbase disclosed this during its Q1 2022 (January-March) earnings release. At that time, CEO Brian Armstrong explained, “We have added items due to the disclosure requirements newly requested by the US SEC.” “We should have updated our terms of service sooner and proactively informed users about new disclosures,” he apologized.
Coinbase also clarified that it does not handle unregistered securities. Before listing on Coinbase, each cryptocurrency is rigorously vetted, and the process is also reviewed by the U.S. Securities and Exchange Commission (SEC).
RelationUS Coinbase faces two class action lawsuits