New Class Action Complaint Alleges Coinbase 'Knowingly' Violated Securities Laws

Cryptocurrency exchange giant Coinbase has been slapped with a new class action complaint from investors who said they "suffered investment losses" due to the exchange's "shadowy" conduct.

"Coinbase has been a part of a shadowy crypto ecosystem operating just outside of the law since formed over 10 years ago ... Coinbase has knowingly, intentionally, and repeatedly violated state securities laws since it began doing business," the plaintiffs said in their complaint filed last week that was picked up by the crypto industry over the weekend.

The filing was made at the California Northern District Court's San Francisco Division. However, a Coinbase User Agreement updated on Feb. 6 states that the exchange is "not registered with the U.S. Securities and Exchange Commission (SEC) and does not offer securities services in the United States or to U.S. persons."

According to the complaint, Coinbase specifically identified crypto assets it sells as "securities" in the User Agreement with investors and other customers, but it "has never registered itself, its people, or the crypto securities it sells." Since the exchange has not registered itself Plaintiffs seek their full rescission (contract cancelation), statutory damages under state law, and, in addition, injunctive relief," the complaint said.

"The claims in this litigation are legally baseless. We have full faith in the judicial process and look forward to addressing them in full at the appropriate time," a Coinbase spokesperson told International Business Times when reached for comments on the complaint.

The latest complaint is separate from a class action lawsuit filed in Georgia last month that highlighted the alleged alarming incidents within the exchange that resulted in customers being susceptible to illicit transactions and fund theft.

The April lawsuit alleged that the popular digital asset exchange had, at times, blocked users from accessing their accounts for long periods, causing the users to suffer financial strain and frustration. There were also reports of accounts getting hacked and unauthorized transactions being facilitated, as per the lawsuit.

Aside from the April complaint, Coinbase separately faces lawsuit initiated by the SEC, wherein the Wall Street regulator accused the exchange of violating securities laws by acting as an unregistered broker and exchange for digital asset holders.

The exchange moved to get the complaint dismissed, but late in March, U.S. District Judge Katherine Polka Failla rejected Coinbase's motion for dismissal. Paul Grewal, the crypto firm's chief legal officer, said at the time that the exchange was "prepared" for the dismissal and was looking forward to "uncovering more about the SEC's internal views" and talks related to regulating the crypto industry.

This article was updated at 5:01 a.m. on May 7, 2024 to include comments from a Coinbase spokesperson.