Coinbase Officers and Board Members Face Legal Action
A stockholder derivative complaint has been filed against Coinbase CEO Brian Armstrong and other high-profile executives and board members, alleging insider trading during the company’s public listing. The suit claims the defendants profited from non-public information and saved over $1 billion by selling their shares before the price fell.
Details of the Suit
Coinbase shareholder Adam Grabski filed the suit in the Delaware Court of Chancery on May 1. The defendants allegedly sold $2.9 billion worth of Coinbase shares during the direct listing on the Nasdaq exchange and the week that followed.
The suit alleges that the defendants were able to sell their shares before disclosing information they already had that negatively affected the share price, which fell by more than 37% by May 18, after “the compression of the Company’s revenue margins during the first fiscal quarter and the issuance of a dilutive convertible offering were publicly disclosed.”
The Accusations and Demands
The suit charges breach of fiduciary duty and unjust enrichment and demands payment of damages to the company with interest, return of ill-gotten gains to the company, and reimbursement of the plaintiff for expenses. Nine individuals are named in the suit, including Coinbase CEO Brian Armstrong and board members Marc Andreessen, Frederick Ehrsam, Fred Wilson, and Kathryn Haun.
Coinbase has dismissed the lawsuit as meritless, stating that as the most popular and only publicly traded crypto exchange in the US, they are at times the target of frivolous litigation.
Other Legal Challenges and Recent Developments
The lawsuit comes on the same day as a class-action suit over alleged violations of Illinois privacy laws in Coinbase’s Know Your Customer procedure. Meanwhile, the company launched the Bermuda-based Coinbase International Exchange on May 2.
The lawsuit against Coinbase executives and board members alleging insider trading during the company’s public listing adds to the legal challenges faced by the popular crypto exchange. While the company has dismissed the suit as meritless, the outcome of the case will be closely watched by the cryptocurrency industry and investors. Regardless of the legal battles, Coinbase continues to expand its operations, as evidenced by the recent launch of the Coinbase International Exchange in Bermuda.