Coinbase Sued for Violating Securities Laws

Coinbase, along with several of its executives, is facing a shareholder lawsuit accusing them of misleading investors about the company’s bankruptcy risks and violating securities laws.

Filed by Coinbase shareholder Wenduo Guo in a New Jersey federal court on February 18, the lawsuit alleges that Coinbase and its leadership did not disclose the possibility that customer assets could be treated as part of the company’s bankruptcy estate, thereby categorizing retail customers as unsecured creditors.

The lawsuit highlights that before Coinbase went public in April 2021, at least 75 cryptocurrency exchanges had collapsed, preventing customers from reclaiming their digital assets.

It argues that despite management’s repeated assurances to the contrary, Coinbase was just as vulnerable to the risk of digital asset loss in the event of bankruptcy.