The Nasdaq-listed crypto exchange, Coinbase has become the target of a class-action lawsuit. The lawsuit alleges that the platform allows its users to trade about 79 unregistered securities, which include dogecoin (DOGE), XRP and shibainu (SHIB). The suit was filed against CoinbaseInc., Coinbase Global Inc. and the company’s CEO, Brian Armstrong, last week. Coinbase users and lead plaintiffs, Henry Rodriguez, Louis Oberlander and Christopher Underwood have alleged that from October 8th, 2019, the platform has allowed its users to buy and sell about 79 cryptocurrencies and has not disclosed that they are securities.
According to the plaintiffs, Coinbase does not have the authorization to operate as a broker-dealer, or securities exchange. Likewise, the crypto securities that are available on the exchange are also not registered with any state regulators, or the US Securities and Exchange Commission (SEC). The plaintiffs stated that Coinbase’s action of selling these tokens are a violation of state as well as federal law. The lawsuit covers every entity or individual who conducted a transaction involving the 79 crypto tokens on the Coinbase, or the Coinbase Pro platform. The plaintiffs stated that since these crypto-assets are not registered with state regulators, or the SEC, those who are buying them don’t have access to disclosures that come with traditional securities.
Instead, people are only able to access the whitepapers that come with these tokens, but are not in accordance with the requirements set out in state and federal securities law. There are some prominent cryptocurrencies that have been named in the lawsuit, including SOL, LINK, ATOM, AAVE, XLM, POLY, ICP, CRO, YFI, BAT, BAL, KEEP, LOOM, NMR, 1INCH, ALGO, DOGE, CRO, EOS, FARM, XRP, CRV, ADA, ACH and AMP. Gary Gensler, the chairman of the SEC, has been cited in the lawsuit a couple of times.
On various occasions, the SEC chair had stated that the crypto sector does not offer enough protection to investors. He had also mentioned that some platforms had listed about 50 to 100 tokens that were most likely securities. However, the regulatory authority has not given a clear definition of which cryptocurrencies it considers as securities. The Commission filed a case against Ripple Labs in December 2020, along with two of its executives, because of the sale of XRP, which it had declared as unregistered securities. However, Ripple has argued that XRP does not classify as a security and the case is still ongoing. The outcome of the lawsuit will have a serious impact on the crypto industry.
According to the class-action lawsuit document filed against Coinbase, the aggregate claims are in excess of $5,000,000, which are exclusive of costs and interest. As far as the plaintiffs are concerned, their goal is to recover any damages, the trading fees and consideration paid for the tokens, along with interest, and also the fees and cost of attorneys. This lawsuit against Coinbase came soon after the Australian competition regulator filed a suit against Meta, formerly Facebook, over fraudulent crypto ads.