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Coinbase, the leading US cryptocurrency exchange, is embroiled in a major legal battle. It faces a class-action lawsuit accusing it of deceiving investors in the sale of digital assets. Filed in California, the suit challenges Coinbase's business strategy, echoing past legal woes for the platform.
Legal Battle Unfolds: Coinbase Under Fire for Alleged Deception in Digital Asset Sales
According to Cointelegraph, Coinbase, the leading cryptocurrency exchange in the United States by volume, and its CEO, Brian Armstrong, are at the center of a significant class-action lawsuit. The suit alleges investor deceit in purchasing equities, a serious legal challenge for the company. It was filed by customers who claimed that Coinbase's business strategy was illegal, echoing a similar lawsuit the firm had already faced.
The action, filed in California's Northern District by law firm Scott+Scott and represents plaintiffs Gerardo Aceves, Thomas Fan, Edwin Martinez, Tiffany Smoot, Edouard Cordi, and Brett Maggard from California and Florida, contends that Coinbase's digital asset sale deliberately violated state securities laws since its beginning.
In their complaint, the plaintiffs claimed that Solana (SOL), Polygon, Near Protocol, Decentraland, Algorand, Uniswap, Tezos, and Stellar Lumens (XLM) are securities.
The complainants say Coinbase admitted to being a "Securities Broker" in its user agreement, classifying digital asset securities sold by the exchange as investment contracts or other securities. The plaintiff also targeted Coinbase Prime brokerage as a securities broker/dealer.
The plaintiffs seek complete rescission, statutory damages under state law, and injunctive relief in a jury trial. This case resembles another class action suit alleging consumer injury due to Coinbase's securities sales.
However, Coinbase claimed that secondary crypto asset sales did not meet securities transaction standards, questioning securities regulations. The court considered different factors before overturning some of the lower court's rulings and upholding others.
Coinbase's Legal Maneuvers Amidst Rising Regulatory Scrutiny and Financial Success
This new case is distinct from Coinbase's well-publicized legal dispute with the SEC, which raises questions about whether tokens sold on the platform should be considered securities. Coinbase has recently filed an interlocutory appeal in response to a judge's decision to let the lawsuit proceed.
In an April 26 filing in the United States. District Court for the Southern District of New York, John Deaton, the crypto lawyer launching a Senate campaign to replace Elizabeth Warren, filed an amicus brief on behalf of 4,701 Coinbase clients.
Coinbase announced a substantial return in the first quarter of 2024, boosted by improved market performance and the introduction of Bitcoin exchange-traded funds (ETFs). The exchange generated $1.6 billion in total revenue and $1.2 billion in net income in the first quarter, resulting in $1 billion in Adjusted EBITDA - a measure of a company's profitability before interest, taxes, depreciation, and amortization.
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