Customers Sue Coinbase, Claiming Exchange Sold Crypto Assets Illegally

News | June 13, 2024 By:

On Tuesday, June 4, 2024, Mollijoy Carter, Antonett Foy, and Bradley Barnes filed a class action lawsuit against cryptocurrency exchange Coinbase and its CEO Brian Armstrong in the United States District Court for the Northern District of California.

In the lawsuit, Carter, Foy, and Barnes allege that Coinbase violated California and Florida state securities laws by selling unregistered securities on their exchange platform without registering as a broker-dealer. Specifically, the plaintiffs invested in various digital assets on Coinbase including Coinbase Earn, Algorand, Polygon, Solana, Uniswap, and Stellar Lumens between January 2017 and present.

They claim these tokens should be considered securities or investment contracts based on how they were marketed and sold by Coinbase. Coinbase touted the assets as investments on their website and promoted them through ads, blog posts, and newsletters to shed new light on how these wealthy individuals are more likely to invest in crypto. Furthermore, Coinbase’s user agreement refers to the assets as “financial assets” and its wallets as “securities accounts.”

The lawsuit argues that by selling these unregistered securities and operating as an unregistered broker-dealer, Coinbase is in violation of California and Florida state securities laws. Those laws require any entity brokering securities transactions or selling securities to register with financial regulators and ensure proper disclosures are made to investors.

The plaintiffs are seeking to have the court certify the case as a class action lawsuit representing any individual who purchased these digital assets from Coinbase during the alleged time period. If certified, the class could include tens or hundreds of thousands of Coinbase customers. The lawsuit seeks damages and claims that Coinbase should have been registered as a broker-dealer, just like traditional financial firms.

Please contact BlockTribune for access to a copy of this filing.