Coinbase slapped with class-action lawsuit in San Francisco

Cryptocurrency exchange Coinbase and CEO Brian Armstrong are facing a new class-action lawsuit.

A class of plaintiffs from California and Florida filed the lawsuit in the U.S. District Court for the Northern District of California, San Francisco Division.

Plaintiffs Gerardo Aceves, Thomas Fan, Edwin Martinez, Tiffany Smoot, Edouard Cordi and Brett Maggard allege that Coinbase’s sales of digital assets have knowingly violated state securities laws since the company’s founding.

The lawsuit alleges that various tokens were sold on Coinbase, including Solana (SOL), Polygon (MATIC), Near Protocol (NEAR), Decentraland (MANA), Algorand (ALGO), Uniswap (UNI), Tezos (XTZ), and Stellar. Lumen (XLM) should be classified as a security.

According to the plaintiffs, Coinbase acknowledged in its user agreement that it was a “Securities Broker,” suggesting that sales of digital assets on the platform could qualify as investment contracts or other types of securities.

The lawsuit also alleges that Coinbase’s Prime brokerage acted as a securities broker.

Plaintiffs are seeking full rescission of these sales, statutory damages under state law, and a proceeding to a jury trial. This case bears similarities to another class action lawsuit alleging consumer harm resulting from Coinbase’s sale of securities.

However, Coinbase pushed back, arguing that secondary sales of crypto assets did not meet the criteria for securities transactions and questioning the applicability of securities regulations in this context.

This case is separate from Coinbase’s ongoing legal battle with the U.S. Securities and Exchange Commission (SEC), which is also examining whether tokens sold on Coinbase should be considered securities. Recently, Coinbase filed an interlocutory appeal in response to the judge’s decision allowing the SEC case to proceed.

Crypto.news reached out to Coinbase for comment but did not receive a response.

Coinbase faces multiple lawsuits

Separately, pro-cryptocurrency attorney John Deaton has stepped in to support Coinbase’s legal battle with the SEC by filing an amicus brief.

Deaton, known for his crypto advocacy and campaign against Massachusetts Sen. Elizabeth Warren, is said to be providing his services for free.

His involvement dovetails with Coinbase’s response to the SEC’s allegations and efforts to gain clarity on regulatory issues, highlighting ongoing tensions between cryptocurrency companies and financial regulators.

In June 2023, the SEC filed a lawsuit against Coinbase, accusing the cryptocurrency exchange of operating as an unregistered national securities exchange and broker.

The SEC alleges that Coinbase traded at least 13 crypto assets that were required to be registered as securities, including tokens such as Solana, Cardano, and Polygon.

Separately, hundreds of Coinbase customers have sued the company over its handling of the GYEN stablecoin, which they claim is far from stable.

This lawsuit alleges that Coinbase promoted and traded the GYEN token despite being aware of its high volatility, resulting in significant losses for investors.

Coinbase’s crypto staking program has also come under regulatory scrutiny. The SEC alleges that the scheme operated as an unregistered investment contract and security. Several US states have joined the SEC’s lawsuit, accusing Coinbase of violating securities laws in connection with its staking rewards program.

Coinbase has pushed back against regulatory pressure. Armstrong expressed pride in representing the crypto industry in court and called for clearer regulations.

But legal experts warn that the SEC’s actions could limit U.S. investors’ options and increase fees as platforms turn to less regulated markets.

These cases reflect ongoing tensions between cryptocurrency companies and financial regulators over how to classify and supervise digital assets. As the SEC intensifies crypto enforcement, more legal battles are likely for Coinbase and other major players in the industry.